The Central Bank is predicting a recovery in the global and Irish economies and says that the global downturn we have been through was one of the shortest on record.
In its Spring Bulletin, the bank says an economic recovery now appears to be emerging, though the US is further along this path than the euro zone.
It says the upturn is expected to be 'quite gradual', though activity will pick up during this year. It adds that official interest rates are expected to rise this year.
In Ireland, the bank points to an improvement in industrial confidence, expectations of a recovery in export demand, and also to robust demand within the domestic economy.
It says GNP growth could average 3% for this year, though it warns that this could be difficult to achieve if the international recovery is slower. The bank estimates that GNP growth came in at 5% last year, despite a slowdown in the second half.
The bulletin notes that consumer spending ended last year at a particularly strong level, adding that this may have been due partly to the euro changeover.
For the year ahead the bank is predicting continued growth in domestic demand with lower taxes continuing to boost disposable income. It expects household income growth to be restrained by a slower pace of employment creation, however.
The bank is also predicting some positive trends in inward investment on the back of continued improvement in the global economy.
It also notes that although unemployment has increased in recent months the pick-up in the economy as this year progresses will ensure that the unemployment rate peaks at just 4.5% in the second half of the year.
On inflation, the Central Bank says the lower headline rate in 2001 masked a further increase in the underlying trend.
Excluding volatile elements such as energy and food, the bank estimates that underlying inflation crept up to 4.4% in 2001 from 3.8% in 2000. It says this is almost entirely accounted for by domestic factors, in particular the high rate of increase in service sector inflation.
It is predicting a headline rate of 4.25% for 2002, after an average 4.9% last year. The bank says the rate of wage inflation will moderate from 9% in 2001 to 7.5%, but this will be accompanies by a sharper fall in output growth, leading to a further loss of competitiveness.
