Ireland's construction boom is set to continue for the next two years, according to Davy Stockbrokers, which has increased its output forecasts for the industry for the second time in five months. Last March, Davy revised its forecast for the increase in construction output from 6.5 per cent to 10.5 per cent. Now it has raised it to 12.5 per cent.

The broker admits that, at the start of this year, it had expected a slowdown in building activity, mainly in the residential sector in Dublin.

This slowdown has not happened; in fact, the reverse is the case. According to Davy: "The pace of growth in Irish construction in recent years has been almost dizzying."

After a 7 per cent decline in output between 1991 and 1993, there have been total volume gains in the industry of just under 50 per cent over the past three years.

Housing starts in Dublin have shown little or no growth because of the shortage of land, but this has been balanced by continuing high housebuilding rates outside the capital, according to Davy.

Mortgage lending has grown 14 per cent year-on-year, while housing starts are also up 14 per cent. Overall, Davy expects residential investment to grow by 13 per cent in 1997.

Industrial and commercial development remains vigorous but Davy expects a slowdown in tourism and agricultural investment. As a result, the broker expects only a modest increase in private non-residential output from 10 per cent to 10.5 per cent this year.

Infrastructural development is, however, more than taking up the slack and Davy has increased its forecast for growth in this sector from 18 per cent to 28 per cent. In 1998, Davy is expecting some slackening in output growth, but its 8.5 per cent forecast will still make Ireland one of the most vibrant construction sectors in Europe. The only risk to its forecasts is possible shortages of labour and serviced sites for housing.

"We reckon it is a safe bet that Ireland should once again finish well up the growth league table, given the likelihood of strong infrastructural spending in what will represent the final year of the current phase of the EU structural funds programme," says the broker.