Davy Stockbrokers has issued the most optimistic growth forecasts for the economy so far, predicting growth of more than 10 per cent this year. The broker's forecasts compare with the latest Department of Finance estimates for an 8.7 per cent rise in Gross National Product (GNP).

Davy suggests continued strong economic growth will continue to reduce the number of people out of work, forecasting the rate of unemployment will drop to 9.4 per cent.

Making its predictions, economists Mr Jim O'Leary and Mr Michael Crowley rule out any sign of overheating or an imminent recession after the boom. They suggest that while the pace of economic growth may subside early next year, it should pick up again in 2000. Next year, the brokers believe the economy will expand by a more modest 6.5 per cent, only to take off again. "We would not dismiss the possibility that what is in prospect for next year is a mid-flight refuelling that will be followed by a re-acceleration in 2000 in the same way as the slowdown of 1996 was followed by the resumption of very rapid growth last year," according to Davy's latest Irish Economic Report.

And while acknowledging evidence of overheating in certain sectors of the economy, it states that such pressures are not "virulent or widespread".

"A steep acceleration of wage inflation has occurred in the building industry where hourly earnings of skilled operatives rose by almost 20 per cent in the 12 months to last December, but there are no clear signs of an upward trend in earnings growth in other sectors. "Nor is there compelling reason to believe that the kind of wage pressures now evident in the building industry will spread."

Davy firmly dismisses the escalation of house prices over the past two years as contributing to overheating within the economy and predicts a continued rise in house prices for the foreseeable future.

The economists have warned, however, that the most obvious external risk to the domestic economy is the unfolding crisis in Asia.