result, the investment share has risen from around 18 % to 28 % of gnp over this period. within this sector, building and construction has expanded very strongly over the period, rising from about 10 % of gnp in 1994 to 18 % this year. tighter monetary conditions in the euro area and a restoration of more sustainable growth rates would inevitably reduce the returns on investment. this could raise questions about the viability of some of this investment. investment : percentage of gnp total building and construction machinery and equipment 18. 4 10. 5 7. 9 19. 3 11. 0 8. 3 21. 0 12. 5 8. 5 22. 9 14. 1 8. 8 25. 0 15. 3 9. 7 27. 4 17. 0 10. 4 2000 ( f ) 28. 5 18. 0 10. 5 source : national income and expenditure central statistics office, and central bank forecasts. these developments that i have outlined in relation to property prices, bank credit and investment inevitably raise concerns about the soundness of the financial sector. the bank, as the supervisory authority, has impressed on credit institutions the need to continue to maintain prudent standards in lending. in relation to mortgage finance, lenders have been requested to adhere to prudent norms in regard to loan - to - value ratios of houses and conventionally accepted income multiple norms. as i mentioned earlier, institutions have also been required to undertake sensitivity analyses in relation to adverse events such as an economic downturn or a sizeable interest rate increase. institutions are constrained by sectoral limits in regard to lending to specific sectors - this is a significant constraint on undue exposure to individual sectors. institutions must also apply prudent loan loss provisioning policies. in this regard, the bank is exploring ways in which counter - cyclical provision policies should be actively pursued by credit institutions. conclusion ireland ’ s economic performance has been exceptionally strong over the period since 1994 following the uncertainty and turbulence associated with the ems exchange rate crisis of late 1992 / early 1993. over this period, the growth in ireland ’ s gross national product has averaged about 8 %. decomposing this growth into its components in a growth accounting exercise indicates that about 4½ percentage points of this growth is due to increased inputs of labour and capital, with all other influences accounting for about 3½ % of gnp growth. some part of these other influences that increase growth may be due to “ new economy ” effects associated with structural changes in the

##ration in the rate of house price inflation is expected. property prices : annual percentage increases residential a commercial b rents c 4. 1 7. 6 2. 3 7. 2 4. 2 1. 8 11. 8 11. 1 8. 2 17. 2 17. 0 10. 6 22. 6 32. 1 14. 6 18. 5 23. 8 16. 1 13. 9 21. 6 16. 2 d ( a ) department of environment and local government, national new house prices. ( b ) jones lang lasalle, capital values. ( c ) jones lang lasalle, rental value for irish commercial property. ( d ) jan. - sept. 2000, year - on - year. commercial property prices have followed broadly similar trends to residential property prices with the rate of increase accelerating from 1996 onwards. since then, prices have risen by 113 %. the rate of increase in rents in the commercial property sector also accelerated in 1996, and while still strong, the cumulative rate of increase has been somewhat lower than for commercial property prices. these increases reflect very low vacancy rates, low nominal interest rates and a high level of business confidence. associated with this acceleration in residential and commercial property prices, and perhaps to some extent driving it, has been a large rise in bank lending. personal sector credit, which is dominated by residential mortgage lending, has risen strongly in recent years, although at a slower rate than total private - sector credit. the share of non - housing personal sector credit in total lending has remained relatively stable in recent years and was lower at end - 1999 than end - 1994. lending to real estate and construction activities rose from some 6 % of total lending at end - 1994 to over 8 % at end - 1999. bank lending : annual percentage increases to selected sectors total private - sector credit a personal b, c building and construction b, d financial b, g other b, h 11. 8 10. 5 16. 1 15. 2 4. 0 11. 2 13. 1 12. 1 2. 1 7. 2 15. 4 15. 9 26. 3 12. 3 17. 1 23. 6 21. 0 19. 8 47. 9 13. 5 23. 6 19. 3 58. 1 35. 7 21. 4 31. 6 26. 0 50. 2 86. 9 22. 9 2000 i 24. 2 17. 8 58. 4 39. 3 25. 6 ( a ) adjusted for lending to non - bank