Davy has revised its economic forecasts for 2021 and 2022, and predicts that Ireland's GDP will grow by 15.5% this year.

“This mainly reflects the exceptional performance of the buoyant multinational sector which has expanded by 24% so far this year,” said economist Conall MacCoille. “However, buoyant employment, consumer spending and tax revenues point to a strong rebound in domestic activity. So we expect indigenous sector output to grow 6.7% in 2022 vs 6.3% previously.”

He added that the rebound in indigenous sector output in Q3 was disappointing, with activity still 4% below pre-pandemic levels.

In MacCoille's view, buoyant employment, consumer spending and tax revenues point to the rebound being sustained into the final quarter.

Corporation tax, up 35% YTD, income taxes (up 15.8%) and VAT receipts (up 2.3%) have risen above 2019 levels. Similarly, the Labour Force Survey and Revenue PAYE payroll measure indicate employment has now recovered above pre-pandemic levels, accompanied by a substantial decline in jobless claims.

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MacCoille said: “While output in some sectors is still impeded by Covid restrictions, there is no doubt Ireland’s economy has performed well through the pandemic. The upshot is that the government deficit will equal just 1.3% of GDP in 2021.

“Inflation accelerated to 5.3% in October and our forecast is for a 3.8% rise in calendar year 2021, which will hit real incomes. However, modest income tax cuts in Budget 2022 will support disposable incomes, and we assume households will cut their exceptionally high savings rate to offset price rises. Hence, our forecast is for 7.3% growth in consumer spending in 2022 to above pre-pandemic levels.

“We also expect house price inflation will fall back to 4.5% through 2022, after 11% growth in 2021, as affordability holds back prices.”