The Irish economic recovery is gathering pace and becoming more broadly based, according to a new report that predicts gross domestic product (GDP) to rise by 6.3 per cent this year and 4.5 per cent in 2016.

The report from Friends First says the level of GDP and gross national product (GNP) this year has now surpassed the level of economic activity recorded shortly before the crash in 2007.

It forecasts that GNP will rise by 5.6 per cent this year and 4 per cent in 2016. The study also predicts consumer confidence will translate into more spending by the public with consumption increasing 3.6 per cent in 2015 and by 4 per cent next year.

However, while noting that growth indicators for the economy are strong, the report's author Jim Power warns that prudent management is still needed in areas of fiscal policy and competitiveness.

“Over the past couple of years the economy has been given a major boost by 4 factors that are totally outside of the country’s control. Oil prices have fallen by over 50 per cent; the euro has weakened significantly against sterling and the dollar; the ECB has been pursuing a policy of historically low interest rates; and the strength of growth in the US and UK has insulated Ireland from the sluggish growth in the euro zone. While all of these factors look set to remain favourable in 2016, it is important to remain vigilant as ongoing efforts are required to ensure the economic growth continues. A strong focus will have to remain on all aspects of competitiveness - cost and non-cost - and in continuing to push the sovereign debt burden downwards,” said Mr Power.

He said the biggest threat to the economy remains political, with next year’s general election and a possible “Brexit” by the UK from Europe possibly impacting on recovery.

Housing has also become a key issue, according to Mr Power, with a need for the State to become further involved in resolving the property crisis.