Dan McLaughlin looks at how the Celtic Tiger is likely to weather the rough seas of the global economy.
Sometimes things turn out broadly as expected, even in the uncertain world of economic activity. Most forecasters had projected a pick-up in global growth in 2004, and this duly occurred, albeit with some surprises to the upside - the world economy had its strongest performance for almost 30 years.
There were some disappointments - yet another sluggish expansion in "Old Europe" for one - and some wild cards (oil prices at $50, for example), but in the main a host of countries achieved strong growth, including Ireland, the UK and most of Asia.
"New Europe", too, did well, but the star performer has to be the US, again proving formidable in shaking off political and economic uncertainty to deliver a year of above-trend growth - Boston well and truly beat Berlin in 2004.
With GDP figures now available for the first nine months of the year, the US looks to have grown by about 4.5 per cent in 2004, well above its longer-term potential rate of 3.5 per cent, driven by a sharp rebound in business spending and a steady increase in consumer outlays.
The US corporate sector initially responded to this increase in demand by boosting overtime working, but the sector gradually began to hire more labour, with the result that the economy created over two million jobs in 2004, pulling the unemployment rate down to 5.4 per cent from a cyclical high of 6.3 per cent in mid-2003.
The sluggish labour market performance in the early part of the year was also seen as a threat to President Bush's re-election prospects, which is a revealing insight into the extraordinary difference in political economy between the US and Europe.
In the former, an unemployment rate of 5.6 per cent, as it was in the spring, is seen as grounds for disqualifying a president from re-election, whereas an unemployment rate of 9 per cent in the euro area barely raises a political eyebrow.
Indeed, blather from European leaders about a "Lisbon Agenda" for job-creation is given serious column inches in the European media when it would be laughed out of court in the US, where job-creation is rightly seen as a market response to strong economic growth.
The US presidential election campaign also threw up the spectre of protectionism and proposals to curb investment abroad by US firms, phenomena which would have been very negative for Ireland, in particular, given the importance of foreign capital inflows.
The Taoiseach saw this, if not the media - a victory for Senator John Kerry would have been bad for the Irish economy if he had chosen to pursue in office some of the politics he had espoused on the stump.
From a global perspective, 2004 was also notable for an eastward shift in the balance of economic power, with Asia proving to be the most dynamic region, led by one old-timer, Japan, and a newer kid on the block in China.
The former had been written off as a basket case for a decade, but it has bounced back, while the latter continues to grow at 9 per cent per annum, a feat which has propelled it into the top five in terms of world GDP.
China is now a clear economic powerhouse, both as a major exporter of manufacturing and as a giant importer of raw materials and energy.
The strength of this latter demand helped to propel a range of commodities to new price highs in 2004, including oil, to the detriment of western consumers. But the same consumers are benefiting from the plethora of cheap manufactured goods flowing out of Chinese factories, contributing to the low level of global inflation.
China has also chosen to fix its currency to the dollar, so the desire of the financial markets to sell the US currency had to be satisfied elsewhere, with the result that the euro ended the year at new highs against the greenback.
This was all the more inappropriate given yet another limp performance from the euro zone economy.
The euro area's potential growth rate is now probably as low as 2 per cent, but output never even reached that level, making it the fourth year in succession in which the economy has under-performed relative to potential.
Fortunately, the most recent set of data from France and Germany hints at some improvement, so the gloom about prospects in the euro zone during 2005 may prove overdone. Moreover, the dollar may well rally, underpinned by higher interest rates in the US.
From an Irish perspective, one recent third-quarter statistic best encapsulated the economy in 2004 - the fact that employment rose by 57,000 over the previous 12 months.
This not only highlighted the strength of Irish economic activity. It also underlined the real constraint facing the economy - a shortage of labour.
Despite all the nonsense about competitiveness, the Republic is now back at full employment, so from here onwards the pace of economic growth will be constrained by the growth of the labour force.
Fortunately, this is still expanding at a rapid clip for demographic reasons alone, but a key additional impetus has come from immigration, which has averaged over 30,000 per year in net terms since the millennium.
Moreover, an increasing proportion of these workers are coming from the new EU accession states, which may come as a surprise to those who had envisaged a flight of capital in the other direction, but not to others familiar with the high unemployment and income-tax rates prevalent in eastern Europe.
The strength of the domestic economy - annual GDP growth averaged 5.6 per cent in the first three-quarters of the year - also proved an unexpected welcoming gift to the new Minister for Finance, Mr Cowen, with tax receipts exceeding the 2004 Budget expectation by over €2 billion.
The Minister did not disappoint expectations and duly delivered an expansionary Budget for 2005, but it is fanciful to portray this as a departure from his predecessor's policies, either in terms of Government spending or in relation to taxation.
Indeed, I suspect that his reluctance to widen the standard tax band by a substantial amount will be seen as a major negative as the new year unfolds, particularly as the projected increase in tax receipts is conservative, making another revenue overshoot more than likely.
There is a plus side for Ireland to the dismal euro zone performance - interest rates have remained unusually low and are unlikely to rise to levels over the next few years which will materially cramp Irish economic activity.
Consequently, GDP growth in Ireland is likely to remain in a 5-6 per cent range in 2005, although the main drivers may change, with personal consumption and exports likely to take over from construction and business spending as the main engines of growth.
Inflation, too, will be well-behaved, and the major problem facing Irish business will again be how best to attract and retain labour - if one taxes capital at 12.5 per cent and labour at 48 per cent, one should not be surprised to end up with a lot of the former and a scarcity of the latter.
Dr Dan McLaughlin is chief economist with Bank of Ireland