Think tank forecasts that Ireland's domestic economy will continue to be strong

money in the euro

According to a top think tank, domestic economic growth in the Republic of Ireland is predicted to continue to be "robust" this year and next.

According to the Economic and Social Research Institute (ESRI), modified domestic demand is anticipated to increase by 3.5 percent this year and by 4 percent the following year.

Risks to the economy, according to the report, included "stubbornly high" core inflation and some indications of deteriorating export performance.

Ireland's consumer price inflation decreased to 6 point 6 percent in May, but core inflation rose to 6 point 3 percent.

Core inflation is a measurement that excludes erratic energy and food prices.

According to the ESRI, this could indicate that the forces driving inflation are changing from "external energy-related pressures to domestic inflationary elements.".

The analysis shows how the Irish government must strike a balance in its upcoming budget between using some of its sizable budget surplus and avoiding inciting inflation.

As a result of a windfall in corporation taxes, the government is predicted to post significant surpluses in the years to come.

A surplus of €9 point 8 billion is expected this year and €15 point 5 billion the following.

The coalition government has agreed to establish a sovereign wealth fund to invest a large portion of this windfall, but there is anticipation that the budget will include personal tax reductions.

The government should adhere to its self-imposed spending limits, according to a budget watchdog, the Irish Fiscal Advisory Council, in order to "avoid overheating the economy or increasing reliance on unreliable tax receipts.".

The government would "risk repeating the mistakes of the 2000s" if it exceeded its own spending cap, the report warned.

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