JUST how strongly has the economy performed this year? Should we really believe all this stuff about the Emerald Tiger economy?

It has been an exceptional year by any standards. The economy has by more than 6 per cent, the number of people at work has probably risen by close to 50,000 and the "feelgood factor" has finally arrived. What's more, despite the booming growth performance, the rate of inflation has remained remarkably low, at less than 2 per cent for the year on average. Indeed the last three years may be looked back on, golden era in Irish economic performance, with the number of people at work rising by some 130,000 and growth rates on a par with the best years of the "Asian Tiger" economics. The only question now is can it continue?

So can it?

The immediate outlook is bright enough. The economy is speeding along with few signs of inflation picking up and most of our major export markets should put in a solid performance next year. The economy should grow by another 5 per cent or so, enough to keep job numbers moving in the right direction.

And the big industrial projects announced this year should start moving towards production this year, giving another lift to the economy.

The IBM project promising 2,850 jobs for Mulhuddart was the biggest landed in years.

So nothing can go wrong?

That might be putting it a bit strongly. The Government and the Central Bank are probably a bit worried about the danger of inflation picking up, particularly as 1997 is the year when economic performance counts towards qualification for the single currency. Higher interest rates might help cool the economy, but the problem for the authorities is that the move towards monetary union is pushing rates in the opposite direction. For the moment investors are betting that the single currency will go ahead and are, taking the view that Irish rates will fall closer to European levels over the next year or so.

But surely inflation at 2 per cent can hardly be regarded as a danger?

Normally it would not be. But the rules for qualification to the single currency suggest that the Government would like to see inflation held comfortably under 2.5 per cent next year. This doesn't allow much leeway. And with a giveaway Budget on, the cards, a bit of argy bargy between the Government and the Central Bank in the new year cannot be ruled out.

Are we in for a real giveaway Budget?

Despite warnings from the Central Bank, a generous Budget is on the cards. Ruairi Quinn will announce a cut of at least one percentage point in the standard 27 per cent income tax rate and a similar reduction in the 5.5 per cent employees PRSI rate. The 27 per cent band will also be widened and companies will benefit from cuts in the 38 per cent and 30 per cent corporation tax rates. All in all, while Mr Quinn will protest that it is an exercise in prudent economic management, nobody will be in any doubt that an election is on the way.

But can we afford it?

The Exchequer can afford tax reductions and an expansionary Budget in itself may do little to fuel inflation. But the worry is that the Government is starting to loosen the reins all over the place. Water charges and the Residential Property Tax are gone - although higher stamp duty on more expensive houses will pay for the latter - spending is increasing well ahead of inflation and a national agreement with commitments to all kinds of things has just been signed. We are witnessing a bout of Santa Claus economic management. A present is being put in everyone's stocking with the hope that come polling day they will still believe there is a crock of gold at the end of rainbow coalitions.

But didn't the Government say it wouldn't have a new national programme at any price?

Indeed it did. And up to the last minute Ruairi Quinn was telling us that the pay deal for the public sector could not be the same as the sector. Then suddenly the identical package. It appears that the Government negotiators got the same treatment as the Christmas turkey.

Commitments in the new programme to "aim " to hold the increase in current spending in 1998 and 1999 to 2 per cent in real terms are thus being seen as a bit of a joke. And the public sector unions will worry little about warnings from Ruairi Quinn that they must show flexibility without expecting yet more cash.

But surely we can afford it, with the economy continuing to grow so fast?

The new programme is based on growth of around 5 per cent a year over the next three years. But even with such a performance it will be hard to keep all the commitments.

And if growth slows at all, then the sums will become impossible and the Government of the day may struggle to stay within the borrowing limits set by Europe in the Maastricht rules and the stability pact for members of the single currency.

Will we ever hear the end of these Maastricht rules and talk about the single currency?

You may think there has been a lot of talk about Maastricht and monetary union already. But you ain't seen nothing yet. Economic performance next year will count towards qualification for the single currency, which will lead to an extraordinary focus on figures from across Europe. It may also lead to some instability in the financial markets and a lot of squaring up, politically for crunch talks in early 1998 about who will be in and who will be out of the first wave towards monetary union in 1999. This is one of the biggest and riskiest economic projects ever undertaken and will be the issue of 1997.

So will we qualify?

We're in the Carlsberg position, we'll make it - "probably". The pound has been a bit more volatile than the Central Bank would like, and our national debt is still above the 60 per cent guideline, although it has fallen steadily. But given the political compromises which will be made to get others in, then we are one of the best qualified under the Maastricht rules. But expect a lot of squabbling about whether the Italians get in or not.

So to sum up?

A strong start for the economy next year, a lot of talk about EMU, a generous Budget, but a few headaches for the Government as growth tapers a little late in the year and preparations start for the 1998 Budget, which will be delivered in November. It's unlikely the current Government will be around long enough to allow Ruairi Quinn to be the first Minister to deliver two Budgets in one year. Though you never know.