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Regulator says strong growth in domestic demand will push GDP growth up to 5.1% this year.

The Central Bank has revised its growth forecast upwards for the Irish economy for 2016, and is now predicting growth of 5.1 per cent, up from 4.8 per cent previously, “on the back of exceptionally strong rates of growth in domestic demand”. However, it warned that Ireland’s economic recovery is “not complete” as it forecasts “marginally lower growth” for 2017.

Overall the outlook for the Irish economy remains “broadly favourable” the Central Bank said in its quarterly accounts for the second quarter of the year. It is forecasting gross domestic product (GDP) growth of 5.1 per cent for 2016, up by 0.3 per cent from its prior forecast, and 4.2 per cent for 2017, down from 4.4 per cent previously, as it says that domestic demand is now firmly the main driver of expansion.

Chief economist, Gabriel Fagan said: “The growth outlook is relatively favourable and domestic economic momentum is strong, although there are some risks to the outlook from external factors. The main driver of growth will be the continuing recovery in employment and incomes, although following its very strong growth in recent years, employment growth is projected to gradually moderate over the forecast horizon.”

Export growth is also set to remain favourable in 2016 and 2017,although it noted that the impact of this on overall economic growth is projected to be largely offset by continued strong growth in imports.