The era of exceptionally strong Irish growth is now over, and structural change is needed to maintain a strong economic position, Central Bank Governor John Hurley said today.
"Ireland has undergone very high levels of structural change and the results have generally been beneficial," Mr Hurley said in opening remarks at a conference on productivity in Dublin.
"If we had simply tried to maintain the production structure of the past, with its greater concentration on lower-value added traditional activities, it is implausible to suggest that the economy could have performed in the manner that it has."
The economy has enjoyed double-digit economic growth for a long period from the mid 1990s. Growth has since pulled back but is still is expected to achieve a GDP increase of around 5 per cent this year - more than twice the euro zone average.
Mr Hurley said further structural change was now needed if Ireland was to maintain and improve its relative position.
"The much-discussed era of exceptionally strong growth - representing a delayed catch-up process, if you like - is clearly behind us now," he said, noting a number of specific concerns about the economy's structure.
"In particular, growth has become somewhat unbalanced in recent years, with an unusually high reliance on the construction sector, combined with some deterioration in the economy's export performance.
"The productivity performance of the economy has also weakened, partly in response to this shift in the pattern of activity," Mr Hurley said.
In June, the governor called
for "every effort" to be made to avoid a further erosion of competitiveness given rising costs for companies; the annual rate of consumer price inflation is running at 4.5 per cent.
In the latter half of the 1990s, average annual productivity growth here was about 3.25 per cent, but over the past two years productivity increases have been running at only about 1 per cent annually.
The Minister for Finance, Brian Cowen, has pledged to take steps to tackle Ireland's declining rate of productivity growth in time for the country's general election next year.