The economy is continuing to grow strongly, according to the latest Exchequer returns, which show tax revenues up 18.5 per cent in the first two months of the year. This points to continued strong growth in employment and retail sales.

The overall Exchequer surplus of income over spending for the first two months of the year came to £1.89 billion (€2.4 billion) from just £120 million at the same time in 1999. Tax receipts rose to £2.94 billion at the end of February from £2.48 billion a year earlier.

According to Mr Eunan King, economist at NCB Stockbrokers, the tax revenues are well ahead of the 10 per cent growth that underlined the Government's forecasts for 2000 when the Budget was introduced by the Minister for Finance, Mr McCreevy.

In addition, spending so far this year is coming in at a lower level than last year. Total spending fell to £2.41 billion from £2.63 billion in the first two months of 1999. However, because the figures relate to only two months, they have to be treated with some caution.

The privatisation of Telecom Eireann, now Eircom, continued to boost the figures with some £1.38 billion showing up in the capital receipts.

Capital gains tax grew by 85 per cent to just over £33 million in January and February. Corporation tax also increased very significantly to £83.5 million, an increase of 61 per cent. Income tax was up by 14 per cent to £1 billion pointing to continued strong employment growth. At the same time, value added tax was up 19 per cent to £1 billion, reflecting continued strong retail sales.

The figures reveal no sign of any slowdown in the economy, although the income-tax figures may fall back a little when the tax cuts announced in the Budget come into effect in April.

A series of interest rate rises over the coming months is also likely to cool the economy. As expected, the European Central Bank kept interest rates on hold at its monthly meeting yesterday.