The Irish economy is set for spectacular growth of more than 7 per cent this year, according to Minister for Public Expenditure and Reform Brendan Howlin.

The rapid growth means that the country’s debt as a proportion of gross domestic product (GDP) will fall to about 1.7 per cent, well below the original year’s target of 2.7 per cent.

Ireland was the fastest growing economy in the EU in 2014, with growth of 5.2 per cent. Mr Howlin told Reuters news agency on Wednesday that it was on track to go higher in 2015.

He said there was every likelihood that the final figure for the year could be 7 per cent or above, and some Government sources suggested last night that it could be even higher.

“It’s not unusual for an economy that fell as far as ours did to have an initial bounce-back that is little short of spectacular,” said Mr Howlin.

Better-than-forecast corporate tax returns and a decline in the unemployment rate to below 9 percent have underpinned the rapid turnaround in the country’s figures.

After the budget in October, the Government was criticised by the Irish Fiscal Council for increasing spending this year by €1.6 billion in a supplementary estimates that covered high-spending departments such as Health, Social Welfare and Education.

Too cautious

“People talk about overheating as if we had an economy working at full capacity. We certainly haven’t,” said the Minister, citing an unemployment rate and little sign of wage inflation.

Ireland’s small, flexible economy can “shift our footing very quickly” if circumstances change, he said.

The revised growth figure comes as welcome news for the Coalition, as it will enable both parties to set ambitious targets in their election manifestos.

“The calling card we will present to the Irish people is a continuation of prudence,” said the Minister, “and there isn’t any question of putting anything at risk.”

Spending less

He said the budget in October had forecast the outturn for the year at €54.9 billion, including supplementary estimates for €1.6 billion.

“I am pleased to report that the current forecast on outturn, which is provisional and will remain so until the final figures are in, is set to be in the region of €100 million in gross terms lower than the forecast in the expenditure report,” said the Minister.

He pointed to the impact of the latest figures on the public finances. The general Government deficit target for this year was originally 2.9 per cent of GDP, and that was reduced to 2.7 per cent in the budget.

“In the interim, both November and October saw tax receipts greatly exceed profile,” he said. “The vast bulk of these receipts are sustainable, as confirmed in recent correspondence between the Revenue Commissioners and the Minister for Finance.

“Accordingly, based on the most recent data available, the end-of-year budget deficit forecast for this year will be in the region of 1.7 per cent of GDP.”