Ireland’s economy will continue to grow at the fastest rate in the EU this year, a performance that the bloc’s economics chief has called “brilliant and balanced”.

According to economic forecasts released yesterday by the European Commission, Ireland’s economy will expand by 4.5pc this year, more than twice the EU average.

The strong performance is based on increased consumer spending and a boost in investment. Net exports – the difference between exports and imports – contracted last year and will remain close to zero next year, the EU predicts.

GDP growth was 6.9pc in 2015, the Commission said, an upward revision of almost an entire percentage point on its November forecast.

However, growth will slow to 3.5pc in 2017, with Luxembourg and Romania overtaking Ireland as the fastest-growing economies in the bloc.

Job creation has also continued in Ireland, the Commission said, with unemployment expected to fall from 9.4pc in 2015 to 8.5pc this year and 7.8pc next year – well below the EU and euro-area average.

The budget deficit will drop from 1.8pc of GDP in 2015 to 1.3pc of GDP this year on the back of a higher than expected tax take at the end of last year, falling to 0.8pc of GDP in 2017, the Commission predicts.

Irish inflation will remain close to the euro-area average, rising from zero last year to 0.6pc this year and 1.4pc next year. The Commission says risks to Ireland’s growth forecast could come from a deterioration in the external environment, an interest rate shock or changes in the operations of multinationals, which transferred a record number of patents to Ireland in 2015 and are likely to book more profits in the country as a result.

Ireland’s performance far outstrips the rest of Europe, where Greece remains in recession this year, though it is not as severe as the Commission was predicting in its last forecast.

The EU as a whole will grow by 1.9pc this year and 2pc next year, after expanding by 1.9pc last year, the Commission said, an upward revision of its previous forecast.

Falling oil prices, low interest rates and a weaker euro are shoring up the bloc’s economy but a slowdown in emerging markets could pose a threat to the recovery, the Commission warned.

Fears over the surge of migrants entering the EU and further border clampdowns could also endanger confidence and disrupt growth, the forecast noted – though it did predict a short-term boost for growth from an increase in public spending to cope with the migrant influx.

For more on this article, please visit: Irish Independent