NEXT year will prove crucial for the Irish economy in terms of joining European Monetary Union, with inflation presenting the single biggest risk factor, according to Ulster Bank economist, Mr Eoin Fahy.
In his latest quarterly forecast, Mr Fahy said 1997 should be a good year on most fronts, with the Irish economy growing at around 6 per cent. Interest rates will also remain low, tracking German rates for most of the year, Mr Fahy said.
The most crucial issue he warns, is inflation and whether it can be kept within the 3 per cent level set out under the Maastricht Treaty.
On balance however, Mr Fahy said it is unlikely Ireland will fail the inflation test.
"The impact of any acceleration of wage increases will not be seen immediately and will feed into inflation only gradually throughout the year.
Sterling has also ceased its upward movement against the deutschemark in recent times, which in turn has prevented the pound from falling even further against sterling, helping the inflation outlook," according to Mr Fahy.
