The Irish economy will grow by 6 per cent this year as the windfalls from SSIAs reinforce the growing spending power of Irish consumers, according to Bank of Ireland chief economist Dr Dan McLaughlin.
The economic outlook published by Bank of Ireland Global Markets also asserted that the growth in consumer spending is not being fuelled by debt but by increases in household income, which grew by 10 per cent last year.
"In fact, consumer spending has lagged household income growth for a number of years, implying a rise in the personal savings ratio, which probably exceeded 14 per cent in 2005," Dr McLaughlin said.
"In this respect, consumers can be said to have Berlin-style savings with Boston-style spending," he added.
The outlook predicts that 40 per cent of SSIAs will mature in 2006, a third of which will be spent, adding over €2 billion to consumer spending this year. This will come on top of another strong year of income growth, with employment set to rise by 4 per cent and earnings by 4.5 per cent - the net effect being an overall rise in consumer demand.
According to Dr McLaughlin, the real threat to the Irish economy is the absence of an independent central bank to control interest rates rather than rising oil price, a fall in the US dollar or a slowing down of the US economy.
"To date this has benefited the Irish economy, as Irish interest rates are probably too low for domestic conditions while appropriate for the sluggish German, Italian and French economies. There may come a time, however, when the reverse is true - the Irish economy slows, pushing up unemployment, but interest rates stay high because Germany and France are booming.
"In other words the real risk to the Irish economy is a country-specific shock which hits hard here but leaves the larger European economies unscathed," concluded Dr McLaughlin.