Having prospered while the rest of the world was struggling through the 1990s, Ireland can now rely on broadly favourable economic indicators in the years to come, according to the review.

A period of relative stability in the US and European markets is forecast, marked by low interest rates, low unemployment and increasing world trade growth.

The biggest source of uncertainty centres on the British government's attitude to joining European Monetary Union. The review assumes Britain will eventually bite the bullet and join EMU at the start of 2003 at an Irish pound/sterling exchange rate of about 88p.

"While this is a competitive rate for Irish firms exporting into the UK, it is a high rate for the UK to enter monetary union, particularly given their previous experience within ERM," the review states. But it goes on to concede that the issue of British membership of EMU or the entry rate is "not certain" and the date of joining is "the subject of much speculation".

Irish interest rates are forecast to rise from their current low levels as the other European economies recover and interest rates increase internationally. Under EMU, these rates will, of course, be determined by the European Central Bank and will reflect conditions in the euro zone rather than simply domestic Irish conditions.

With the euro forecast to strengthen in the first years of the new millennium, the Irish pound is expected to appreciate against the dollar and sterling.

As the recovery from the Asian crisis continues, world trade growth is expected to pick up to an annual average of 6.8 per cent in the first five years of the next decade, with a further improvement to 7.2 per cent in the following five years.

On Europe's most intractable economic problem, unemployment, the outlook is also positive. Unemployment rates have already started to fall, and this trend is forecast to continue. By the year 2010, the unemployment rate across the EU is expected to decline to 7.8 per cent.

Aside from the recovery of the European economies, this decline is attributed to labour demand shifts that are more favourable to employment and greater flexibility among companies.

It is difficult to find any bad news on the horizon in this optimistic report. Labour productivity is expected to improve in both Europe and the US in the first five decades of the next decade. Thereafter, Europe should further improve its productivity, thereby making up the ground it lost to the US in the 1980s and 1990s.

The labour forces in both regions are also expected to show stable growth.

In Europe, GDP growth is forecast to improve in the new euro-zone from an annual average of 2.4 per cent between 1995 and 2000, to 2.5 per cent between 2000 and 2005. "A further increase is envisaged thereafter and growth is expected to remain broadly stable at an annual average of 2.8 per cent."

Meanwhile, short-term interest rates in Europe are expected to increase gradually, averaging 2.8 per cent in 1999, before increasing to 5.3 per cent by 2005.

The US, so important for Ireland's and the world's economic performance, is currently in its eighth consecutive year of expansion and there are no signs of a sharp slowdown. The review says the US economy will continue to grow, albeit at a slightly slower rate, and interest rates will remain stable. However, a growing current account deficit, coupled with a strengthening of the euro, should see the dollar depreciate gradually on international currency exchanges.

In the UK, unemployment currently stands at around 4.5 per cent, the lowest level since 1980. However, the tightness of the labour market suggests there is little scope for further reductions, according to the review. The unemployment rate is forecast to rise gradually over the next five years, averaging about 4.9 per cent.

The British economy, having fought off fears of a recession in 1999, is expected to grow steadily in the coming years. Between 2000 and 2005, growth is forecast to average 2.6 per cent before declining to 2.2 per cent over the succeeding five years.

Germany's high levels of unemployment, a continuing hangover from the process of unification, are expected to continue. However, a modest fall from the current level of 10.6 per cent to 8.7 per cent for the years 2005-2010 is forecast. The economy should start to pick up slowly in line with international growth.