Youthful Irish economy to further outpace the European Union

Paul Hoskins:

A young, fast-growing labour force means Ireland's economy can far outpace its European neighbours for another 15 years with growth rates of about 5 percent a year, according to a report published on Wednesday.

In a 184-page study of demographic trends, economists at NCB Stockbrokers forecast that projected population declines across much of Europe meant Ireland's already strong economy would look even more attractive in a European context over the next decade.

"The more vibrant Irish economy will stand in stark contrast to developments elsewhere in the EU for a prolonged period," economists Dermot O'Brien and Eunan King wrote.

The former Central Bank of Ireland economists believe natural growth and immigration could boost Ireland's population from 4.1 million now to 5 million by 2015 and 6 million in 2050.

By contrast, broader EU population growth, which is currently only rising about 0.25 percent a year, is expected to continue slowing before going into decline after 2015.

More significantly, based on current trends and United Nations forecasts, the size of Europe's working age population could begin declining as early as 2010.

"Ireland's prospects are much better than Europe where active populations are on the verge of declining," O'Brien told journalists at a briefing in Dublin.

In Ireland, NCB expects the number of people aged between 15 and 64 to grow by 25 percent between now and 2020 and not begin declining until at least 2030.

O'Brien and King reckon that means Ireland's potential rate of gross domestic product (GDP) growth should be 5.75 percent a year between now and 2010, cooling to an annual 5 percent rate over the next five years and 4 percent between 2016 and 2020.

Ireland's central bank forecasts 4.75 percent GDP growth this year.

In the rest of Europe, failure to improve productivity or prevent a decline in the labour force will mean potential annual GDP growth falls from 2 percent at present to less than 1.5 percent by 2010 and less than 1 percent by 2020.

"The implications of that for pensions are huge," said O'Brien. "The only good thing is that we have plenty of time to prepare for that unlike most European countries."

Ultimately Ireland will face the same problems, with close to four times as many people over 65 by 2050 as at present.

The country has a delayed baby-boom generation from the 1970s and early 1980s, when over 900,000 people were born, who are only just starting to have children of their own.

Even without current high rates of immigration Ireland's population is increasing by about 1 percent a year.

Foreign labour, already rising rapidly thanks to Ireland's thriving economy and an expanded EU, is also expected to make a major contribution to Ireland's future prosperity however.

Such growth rates should also help ensure a soft landing for Ireland's thriving property market, NCB forecast, with demand for new housing at about 65,000 a year until 2015 and 55,000 until 2020. Almost 81,000 new houses were built in 2005.

O'Brien said strong population growth and a maturing Irish economy also made it more resilient to external shocks while the presence of foreign multinationals was no longer as important as it had been during the Celtic Tiger boom of the 1990s.

NCB report forecasts 6% growth for 15 years

Celtic Tiger II: experts predict 15-year boom