February 16, 2011
By Staff Reporter
By Andrew Bushe
DUBLIN — The country’s economic boom is set to continue, according to stockbroker ABN/AMRO’s quarterly review, which predicts 10 percent GDP growth this year and 8 percent in 2000.
"There are few signs of slowdown in the Irish economy, at least in terms of domestic demand."
Despite recent warnings of overheating, the review says Ireland remains competitive and attractive to foreign companies.
In Euroland, wages were lower only in Spain and Portugal, but Irish productivity was higher — so unit labor costs are well below the Iberian countries.
ABN/AMRO’s chief economist, Dan McLaughlin, said the low labor costs and a 10 percent profit tax on companies had led to the record level of foreign investment.
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Car sales were up 28 percent on last year, tax receipts in the year to March were up 13.5 percent and VAT receipts were 16 percent higher.
"It all points to a very strong economy, particularly on the consumer side," McLaughlin said.
There was an export boom in 1998 with chemicals up 80 percent, pharmaceuticals up 50 percent and computers up over 30 percent.
"We expect merchandise exports to rise by 17 percent this year, with imports up 14 percent," McLaughlin said.
With unemployment down to 6.6 percent, McLaughlin predicted pressure for wage increases. Pay rate increases were already running at an average of 5-6 percent.
"It is not jobs that are scarce now, it is people that are scarce," he said, adding that the rapid rise in property prices would cause problems in attracting workers from abroad. Irish homes were now about 30 percent higher relative to the UK, compared to a reverse of that situation 10 years ago.
About 45,000 people have entered the country in the last three years, but about 45,000 left in 1989 alone, with the total net outflow 185,000 in 1985-90.
"On that basis, the pool of potential returning emigrants is large, let alone non-Ireland immigrants," McLaughlin said.
McLaughlin’s report comes as the Central Bank issued a mortgage alert and warned lending institutions that they are advancing too much to borrowers and fueling excessive house prices.
House prices in the Dublin area have been increasing by about 30 percent in recent years.
Bank governor Maurice O’Connell accused lenders of "disturbing practices" in assessing the size of loans.
He said it was "vitally important to take a medium-term perspective" and account for the potential consequences of rising interest rates and economic downtown.