Celtic tiger boom slows
Ireland’s Central Bank today pointed to evidence of a slowdown in the country’s seven-year-long Celtic Tiger economic boom.
The bank’s quarterly bulletin made it clear, though, that the Irish gross national product this year was still set for 6.5%, well ahead of international standards - and talked of the need for Government action to move towards a more sustainable growth level of around 5%.
The document said - in a comment aligning itself closely to European Commission criticism of Dublin’s budgetary strategy - that because of Ireland’s membership of the euro currency zone, ‘‘monetary policy is overly-expansionary for Irish economic conditions.
‘‘This means that other mechanisms must be used as far as possible to facilitate a growth slowdown.
‘‘The fact that domestic demand has recently been especially strong would suggest that fiscal policy can make a useful contribution to promoting stability at this juncture.’’
The bank implied that planned tax cuts would have to be scaled back in order to produce a neutral budget of the type required and avoid stimulating further expansion.
The downturn in the US and the effects of foot-and-mouth disease were among factors blamed for the slowdown to date.
The returns also forecast that Ireland’s rate of inflation - at 5.4% close to double the European Union average - was ‘‘unlikely to abate for some time’’.
And the bulletin added: ‘‘It is arguable that consumer prices may understate Irish inflation and the prices of publicly-provided services have been held down.’’
And the prospects for continuing high sales overseas, the Central Bank document declared: ‘‘While Irish exports have benefited from the value of the euro, this is unlikely to continue in the medium term,’’ and said inward direct foreign investment was poised to reduce because of ‘‘less benign international factors. ‘‘
The bank underscored concern about rising wages hitting indigenous Irish manufacturers, but reported indications that runaway property prices were now moderating.
