The ESRI and Davy both issued reports Thursday forecasting a deceleration in growth to the lowest levels since 1993, driven largely by slowdowns in the housing market and personal consumption, but economists contacted by the Sunday Tribune found reason to be optimistic about the outlook for the next two years.

"The outlook for 2008 reflects a slowdown in consumption after the SSIA bump of this year, but we always assumed it would be the year of the hangover, " said IIB economist Austin Hughes. "There are still reasons to be optimistic about 2009 . . .

once we get over the SSIA party, the underlying position won't deteriorate."

Hughes said a relatively benign interest rate environment and Ireland's "uniquely positive demographics" pointed to continued growth, and a shift in consumer sentiment to save rather than spend SSIA money would mitigate any sharp drop from 2007 to 2008.

"This was supposed to be a champagne year, but there is a distinct lack of fizz at the moment."

Goodbody economist Dermot O'Leary echoed that sentiment. "Our core thesis in the second half of last year was that there was going to be a slowdown in 2008 to 3.5%, but that may have been premature . . . the slowdown is coming quicker."

He said even a premature slowdown won't be a "disaster", because it was expected anyway. Moreover, SSIA money will perk up consumption, ameliorating the effects of decelerating growth. "Luckily it's coming in the same year SSIAs are maturing, which will smooth out the bump." He added that population growth would continue to drive the economy.

Bank of Ireland chief economist Dan McLoughlin is sticking to his January prediction of 5% growth in 2008 and "near that" for the years beyond . . . in contrast to the more pessimistic ESRI and Davy forecasts of 3-4%. The key is National Development Plan spending.

"Nobody disagrees we've seen the peak of the housing market, but there will be a significant expansion in nonresidential construction to overcome the infrastructure deficit."

He said people had become "confused" by the forecasts, forgetting that actual data from 2006 showed 6% growth, rising employment and a healthy construction sector. "The current situation doesn't suggest a problem, " he said.