The Central Bank yesterday upgraded its growth projections for the economy to 2.5 per cent this year, suggesting recovery was stronger than previously signalled.

The more positive economic outlook came as the National Treasury Management Agency said it has raised almost 90 per cent of its indicative funding target of €8 billion for this year. Speaking at the launch of its annual report, the Minister for Finance said the Government hoped to reduce interest payments on our national debt by up to €375 million a year by securing agreement to refinance €15 billion worth of IMF loans from the Troika bailout programme.

There was further positive news for the Government from the Central Bank’s quarterly bulletin as it appeared to back Government plans for a budgetary adjustment of less than €2 billion.

The bank said better than expected exchequer numbers were likely to reduce the amount of consolidation needed to hit the 3 per cent deficit target next year.

The Central Bank noted that unemployment had fallen to just below 12 per cent in about two years. It predicted this trend would continue with the jobless rate falling to 11.4 per cent this year and to about 10.5 per cent in 2015.

Its head of economic analysis John Flynn dismissed suggestions that strong house price growth in Dublin could signal another property bubble as it was not being fuelled by credit. "It is supply which is driving price increases in those areas where house prices are highest."

His comments were in line with a forecast yesterday by ratings agency Standard & Poor’s on Irish house prices, which predicted they will increase by 4 per cent this year.