The economy will expand by 3.3pc next year as exports rebound and the tax take improves, the Central Bank said in its most optimistic forecast in years.

Gross domestic product is seen growing 2.5pc this year and 3.3pc next year, the bank said in its quarterly report published this morning.

If correct, the economy will grow 12 times faster this year than it did last year when the economy eked out growth of just 0.2pc.

However, the bank also warned about giveaway budgets adding that weaknesses remain in European and international economies.

Gross national product, which excludes some of the multi-national sector, is forecast to expand 2.8pc this year and 2.7pc next year.

Unemployment is expected to average 11.4pc this year and 10.5pc next year. It was 13pc last year.

“The on-going recovery in economic activity is showing a somewhat stronger trend overall than previously signalled,” the Central Bank said in its quarterly report.

It added that our smooth exit from the EU/ECB/IMF bailout programme has been aided by our sticking to consolidation and adjustment targets.

The bank said that the priority remains to cut the deficit-to-GDP ratio below 3pc in 2015 and has recommended “prudence in budgetary planning” suggesting that the Government stick to the €2bn adjustment, despite expectations that this will be lower.

Meanwhile, retail sales figures released today by the CSO showed that headline sales were down 1.7pc in June in volume terms but were 4.8pc higher than the same month last year.

The figures also showed that in the first half of 2014 sales were 6.6pc higher than the same period last year.

Excluding motor trades, sales were flat in the month but were 3.6% higher in the year.

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