Economy to grow by 5%, says Central Bank

The Central Bank has predicted that the economy will continue to perform well and will grow by more than 5 per cent during this year and the next.

However, it raised the prospect of oil prices remaining high and uncertainty around currency exchange rates posing downside risks to euro-area growth.

In its quarterly bulletin, the Bank said that while the global economy had weathered the impact of high oil prices well to date, a worrying feature of oil markets recently had been the rise in long-term futures prices.

The Bank predicts Irish GNP will grow by 5.25 per cent and will continue to expand at a similar pace next year.

This suggested higher prices may persist, casting a shadow over the growth outlook, it said. The Bank said exchange rate volatility represented a further threat, with the US dollar susceptible to large swings because of the US economy's large fiscal and external debts.

The Bank said recent confidence surveys and activity data had weakened against the background of the renewed rise in oil prices.

"This is not encouraging and does not suggest that growth is likely to strengthen in the near-term," it said.

"Inflation expectations have remained benign and, while there are some upside risks, underlying inflationary pressures in the euro area remain relatively contained," it added.