Analysis: Marc Coleman Economics Editor If you thought the Celtic Tiger was impressive, you ain't seen nothin' yet. That, at least, is the message contained in the latest long-term forecast on the economy published from NCB stockbrokers.
In a report entitled 2020 vision, Ireland's Demographic Dividend NCB economists Dermot O'Brien and Eunan King describe a grandiose future that would make any Soviet state planner cry with joy.
Our population will grow from 4.1 million today to 5.3 million in 2020. To house this enlarged proletariat, housing production will average around 60,000 units until then. And to transport the masses we will need three million cars on our roads by 2020. Driven by these heroic achievements, the economy will grow by an average of 5 per cent until 2020.
But behind any forecast is a set of assumptions. Leaving aside a bird flu pandemic or an energy crisis, more boring assumptions could derail NCB's vision. Long-run economic growth depends on population and productivity growth. Based on Central Statistics Office data and qualified by contingency analysis, NCB's assumptions on population are defensible.
Where NCB is guilty of dangerous heroism is in relation to its assumptions about productivity growth. Economic growth here is becoming less productive. Manufacturing is shrinking in importance to our economy. Construction and services - generally low productivity activities - are expanding. For that reason, the very reliance of this forecast on housing as a source of future growth is the seed of its possible destruction.
As Friends First economist Jim Power warned yesterday, housing construction is associated with growing debt.
With a public infrastructure system barely able to cope with four million people, an extra million citizens is hardly likely to be conducive to productivity gain. As for the pressure this would put on our cost of living - already the highest in Europe - let's not even go there. For all that, the NCB report is welcome. It paints a picture of the kind of country we could live in 15 years hence - provided our policymakers deal finally with Ireland's spatially dysfunctional economy, poor urban planning and chronic living costs. That may be just one heroic assumption too many.