The Irish economy will grow by 5.3% this year and a further 4% in 2015, according to Goodbody Stockbrokers.

The figures are an improvement on the firm’s previous forecasts, which had predicted growth of 3.5% in 2014 and 3.6% in 2015.

The revision comes after better-than-expected GDP data for the second quarter of the year, which saw the economy grow by 7.7% between April and June.

Goodbody said the figures made Ireland the European Union’s “growth beacon”, especially against a backdrop of stagnation in the region.

“We now expect domestic demand to grow by 4.1% in 2014 and 3% in 2015, led by a robust rebound in business investment and construction activity,” the firm said.

“Export growth has also returned, indicating that fears over the ‘patent cliff’ continuing to impact in 2014 were overdone.”

Goodbody said the Government now had room to manoeuvre with the upcoming Budget, as it expected the deficit to fall below 3% of GDP next year without any further fiscal measures.

“While government debt remains high, we believe there is scope for the government to begin to reverse some of the emergency income tax increases implemented over recent years,” it said.