Irish GDP growth, which plummeted to 1.5 per cent last year from nearly seven per cent in 2002, is set to recover to 3.5 per cent this year and 4.5 per cent in 2005, the OECD said today.
OECD economists pointed to a pick-up in consumer sentiment, industrial output and external trade.
Although foreign direct investment - a key driver of the economic boom of the late 1990s - was unlikely to be as strong as in the past, Ireland's thriving high-tech sector and fast-growing skilled labour force would enable potential growth to stabilise at around 5 per cent a year over the medium term.
With unemployment levelling off at 4.7 per cent and euro appreciation feeding through, Irish inflation - currently around 2 per cent from a peak of 7 per cent in 2000 - was likely to remain subdued, the OECD said.
Ireland's GDP growth gives a misleading impression of the health of the economy because of the influence of the multinational sector in the Irish economy. Profits from these companies are repatriated and are so discounted from the GNP figure which gives a more accurate picture of the wealth of Irish citizens.