Bank of Ireland economist Dr Dan McLaughlin says a consumer boom will fuel economic growth of 6% this year.
In the bank's economic outlook for 2006, the economist also argues that consumer spending is being driven by last year's 10% increase in household income, and not by debt. He points out that spending probably rose by 6.5% in 2005, well behind incomes growth.
'In this respect, Ireland can be said to have Berlin-style saving but Boston-style spending,' he says.
McLaughlin also predicts that a third of this year's maturing SSIA accounts will be spent, adding another €2 billion to consumer spending. This will be on top of 4% growth in employment and a 4.5% increase in earnings.
He expects euro zone interest rates to end the year at 3%, compared with the current 2.25%, but argues that this will not have a dramatic effect on economic activity Dr McLaughlin also plays down the risks to the economy from high oil prices and currency movements.
The economist believes the main risk to the Irish economy is a local shock which leaves larger European countries unscathed. He says the European Central Bank's interest rates are probably too low for the Irish economy, but there may come a time when the reverse is true, and rates are kept high because France and Germany are booming while Ireland is slowing.
