Growth in the economy this year will be “robust” and “unprecedented”, according to the Economic and Social Research Institute.
In its latest quarterly economic commentary, the ESRI predicts the economy will grow by almost 14% this year and 7% next year.
Inflation, however, is expected to be higher peaking at 6% early next year.
The economy’s recovery from Covid has already delivered strong growth this year.
The ESRI predicts this will carry through into next year with the domestic economy growing by just over 7%.
The recovery has boosted tax revenues which the ESRI believes will push the deficit in the public finances down to just under €10 billion this year and to €4.8 billion next year.
The institute warns, however, that higher inflation could erode the benefits to taxpayers and social welfare recipients from changes announced in the recent budget.
It now expects inflation to average around 4% next year, and to peak around 6% in March.
It believes many of the factors influencing inflation will be temporary but warns the future of international energy prices remains uncertain.
It also warns that escalating housing costs for both buyers and renters remain a threat to our competitiveness.
The ESRI says the labour market has also recovered better than expected with a swing from an average unemployment rate of 26% in the first quarter of this year to an average 7% in the final three months of 2021.
Next year, it expects unemployment to further decline to 5%.
It recognises that risks remain, such as further health restrictions from Covid-19 variants and potential trade tension between the UK and EU.
It also points out that the most up-to-date data shows economic growth slackening off in November.
Its quarterly commentary also contains a segment on energy prices. It recommends that investment in LNG facilities and gas storage could help to smooth out short-term swings in demand and should be considered as a response to increasing gas prices.
The coalition’s current Programme for Government explicitly rejected a plan for a LNG terminal in the Shannon Estuary.