'Spending is balancing recovery'
More jobs, disposable income and high street spending are all set to add more growth to the Irish economy this year and next, the Central Bank has said.
Forecasting the strength of Irish business to build by 3.9% and 3.5% until the end of 2016, the regulator's latest bulletin found that last year, consumer demand at home added to the figures for the first time since 2007.
The Central Bank said recovery is becoming more balanced over the last year.
"The momentum of recovery in the Irish economy continues to build and broaden, with domestic demand now making a significant positive contribution to growth," it said.
"Domestically, the continued strong increase in investment spending has been supported by the beginning of a recovery in consumer spending, which is showing signs of gradually strengthening."
Unemployment is being forecast to drop to 9.8% this year and 8.7% next year.
But the Central Bank urged the Government to be cautious and to ensure the revived economy is sustainable now that many legacies of the collapse have been dealt with.
Its latest report said that new jobs boost incomes and more disposable income is becoming available while the growth in spending seen last year has carried into this year.
"On the domestic side, the momentum of recovery is building and it is envisaged that growth will increasingly be driven by domestic sources in coming years," the bank said.
Consumer spending is being forecast to grow by more than 2% this year and next.
The Central Bank said it expects investment spending, particularly in construction, machinery and equipment, to grow strongly .
Elsewhere, exports should grow at a relatively strong rate in the next two years thanks to trade links with the more strongly growing US and UK markets and the potential impact of quantitative easing on the euro area growth and exchange rates.
The economic growth forecasts are more modest from those put forward last week by the Economic and Social Research Institute, which has predicted homegrown business will grow by just over 4% this year and 3.5% in 2016.