The Irish economy will significantly outperform the rest of Europe and grow by a "spectacular" 5.7 per cent this year, the employers' group Ibec has forecast.
Ibec has also predicted continuing strong growth in 2015, with GDP rising by 4.8 per cent, unemployment falling further and investment rising.
It said that in 2014 the recovery finally reached the domestic economy. It maintained that unemployment was falling, investment was on the rise and the Irish consumer was looking ahead with more confidence.
In its latest economic outlook, Ibec predicted that 2015 would see both risks and opportunities for Ireland.
It said lower oil prices were a major stimulus to the domestic and global economy but they were also a symptom of wider emerging market risks.
“Lower oil prices will add extra momentum to the consumer recovery. Every $10 fall in the price of a barrel of oil translates into an additional €100 million spending power for Irish consumers. While this will support more spending in the domestic economy, weakening oil prices are clearly a symptom of emerging market instability.”
Ibec head of policy and chief economist Fergal O’Brien said: “Ireland is well placed to continue growing strongly next year. Unemployment looks set to fall to 10.5 per cent this year and we predict a further drop to below 9 per cent next year.”
“Consumer confidence is on the rise and Christmas sales this year look set to be at their highest level since 2009. [A total of] €80 million more will be spent in the shops this December compared to last. These positive trends look set to continue over the coming months as low inflation supports consumer purchasing power. Record low interest rates should further boost investment.”
Ibec forecast that the weak euro and a gradual recovery in global demand would support Irish exports, which would remain an important driver of the economy.
It predicted that investment would grow by 11 per cent this year and by 13 per cent in 2015.
“Employment growth is set to rise to 2.6 per cent in 2015, with much of this growth in full-time employment. Ibec forecasts unemployment to fall as low as 10.5 per cent by the end of 2014, and to below 9 per cent by the end of 2015. But we still have a long way to go.”
Ibec said the public finances had improved much more quickly than expected. It forecast that with strong tax revenue growth, along with prudent expenditure controls, the deficit would fall towards close to 2 per cent in 2015.
Mr O’Brien said: “Growth is coming from a broad range of sources, with domestic demand and trade contributing strongly. Ireland is set to be one of the world’s best performing developed economies this year. Much has been made of the impact of contract manufacturing on Irish GDP. This should not detract from underlying strength in the economy and exports including traditional sector exports. The impact of contract manufacturing on GDP is likely to be fairly limited over time.”