THE IRISH economy can make up ground lost over the last two years by 2013, according to National Irish Bank chief economist Dr Ronnie O’Toole, who believes the State’s skilled workforce can lead to a swift recovery.

Dr O’Toole said last month’s Live Register figures, which fell for the first time in 2½ years, and the fact the economy had ceased to shrink recently, were encouraging developments.

He said emigration had not been as intense as some feared, and the flexibility of Ireland’s labour market could mean people returning to work more quickly here than in other locations.

Speaking at an economic forum organised by Dublin City Council, Dr O’Toole said Dublin, because of its service economy, had not been as badly hit by the recession as other parts of the State, and Ireland was bound to become a more urbanised place. “One million people living here will move to cities in the coming years.”

Dr O’Toole said Ireland’s corporation tax rate had served the economy well, and a means was needed to make Ireland a more attractive place for people to live and do business.

He said the importance of cultural events in building a brand and reputation should not be underestimated, and Ireland’s income tax rates needed to fall to attract mobile talent here.

Jonathan Stenning, of Cambridge Econometrics, was considerably more downbeat about the prospect of recovery, saying he expected the Irish economy would pick up slowly and grow at an average rate of 1 per cent per annum between now and 2013.

This was in contrast to his predictions for many other European countries which had not been cut as deeply by the recession.

Mr Stenning said the Government did not have the capacity to spend its way out recession, and a small number of areas – such as infrastructure and innovation – should be focused on to encourage investors to engage with our highly skilled workforce.

He said Ireland would struggle to recover from the fall-off in employment in the areas of market services and construction.