There has been a lot of concentration in recent months on the risks to our economic prospects and the problems of congestion and skills shortages caused by the rapid growth of the last five years. And these are all vital issues which need to be addressed. However, the latest report from the Organisation for Economic Co-Operation and Development (OECD), predicting further strong growth in the economy over the next couple of years, also has some important perspectives on our position. The OECD predicts that Irish economic growth will ease in the next couple of years. Gross Domestic Product is expected to expand by an extraordinary 11 per cent this year, easing to 7.9 per cent next year and seven per cent in 2002. In terms of Gross National Product - probably a better measure for our economy as it excludes multinational profit repatriations - growth is forecast to slow from nine per cent this year to 6.2 per cent in 2001 and 5.5 per cent in 2002.
This would be a significant slowdown, but it would still leave Irish growth at well above the international average. The OECD predicts that GDP growth among its 22 member States - comprising all the main industrialised economies - will average 3.3 per cent next year and 3.1 per cent the year after. Policy makers here will take some encouragement from its view that the international outlook is "relatively bright". But an international slowdown, particularly a US recession, would quickly derail the forecasts for Irish growth.
A separate report from Bank of Ireland Private Banking, details of which appear in today's edition of this newspaper, also paints an optimistic picture of growth trends. It forecasts that growth here will be double the EU average over the next five years and that Ireland "is set to become one of the richest States in the European Union." As the OECD points out, the main risk to its relatively upbeat projections are that "the current surge of inflation may become entrenched in expectations, leading both wages and inflation to overshoot and resulting in a greater slowdown of activity than foreseen." It is essential that the Government heeds this warning; whatever the outcome of the current period of industrial unrest, it must not result in the building into our economic structure of excessively high year on year wage increases. The other key policy measure to fight inflation is increased competition. From taxis to the licensed trade, the Government must not be afraid to introduce competition, as this is the best way of holding down prices in the long term.
The OECD also points to the factors that are underpinning growth - investment, technology, population growth and productivity. Policy must also address these areas. Looking at investment, for example, the priority must be to encourage businesses to locate outside the congested Dublin area, while using public funds to tackle key public transport and infrastructure problems.
Indeed, if the OECD is correct, the key job of the current Government - and the next one - will be to spend and invest wisely the fruits of continued economic growth, while also grappling with the expectations of higher incomes created across the workforce. If the investment opportunities are not taken, or expectations feed into much higher inflation, then the OECD's rosy scenario could quickly disappear.