Celtic Tiger on its way back - BOI

The Irish economy has been forecasted to grow at 6% this year prompting analysts to believe that the Celtic Tiger is back.

The Irish economy has been forecasted to grow at 6% this year prompting analysts to believe that the Celtic Tiger is back.

Recent trends across a range of indicators and an upsurge in international economic activity has led Bank of Ireland's chief economist Dr Dan McLaughlin to revise growth forecasts upwards from an earlier 4.5%.

Gross National Product is forecast to grow by 5.5%.

Domestic consumption, investment - boosted by foreign direct investment and exports buoyed by the global economic pickup - are all set to accelerate.

Giving greater cause for optimism however are developments in the labour market, McLaughlin said.

All are particularly encouraging, with latest unemployment figures falling to just 4.4%, from a cyclical high of 4.9%.

This implies that employment is growing by over 50,000 per annum and should prevent a sharp deceleration in wage growth.

One dark cloud on the horizon however is the inflation rate, which the BOI believes has "bottomed out".

Rising oil prices are already putting pressure on costs and this represents a risk to growth in 2005.

Dan McLaughlin said: "The strength of economic activity will also underpin the exchequer finances, and we expect tax receipts to exceed the budget target by €2bn which does not take full account of any inflows from offshore accounts.

"Consequently, the General Government Balance will be in surplus, opening up the possibility of a much more generous tax package in the 2005 Budget," McLaughlin added.

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