The economy is still powering ahead, according to official figures released yesterday. However, current Government spending has accelerated sharply to 9.5 per cent, significantly ahead of the Minister for Finance's 4 per cent target. But the figures are only for one month and thus can show significant variations. There was no comment from the Department of Finance last night.

The 9.5 per cent rise means that supply services spending, which includes public sector pay bills and social welfare payments was almost a billion pounds higher than the previous year. According to Dr Dan McLaughlin, chief economist at ABN Amro, there may be timing factors involved which do not usually become public until later. However, pay awards to the Garda and other public service groups are also likely to be boosting the figures.

Dr McLaughlin said there ought to be downward pressure on spending because interest rates have fallen and thus the cost of servicing the national debt is falling. On top of that PRSI receipts are much higher than anticipated and unemployment - and hence social welfare spending - is falling. "On that basis current spending should come in below target," he said.

The August figures also show the surplus of Government revenue over spending came to £1.03 billion at the end of month with tax revenues growing 12.5 per cent faster than last year, itself a very good year.

According to Dr McLaughlin, the "extraordinarily strong" tax revenues mean that gross domestic product (GDP) is still growing in double digit figures.

To the end of August the Exchequer had collected £10.4 billion in tax compared with £9.2 billion in the same period last year.

Mr Jim Power, chief economist at Bank of Ireland, noted that the Asian crisis was still having no tangible effect on Irish growth.

However, Mr Power warned that the economic crisis in Asia and Russia would eventually feed through to the figures and he said there were two ways in which this would happen. As a small open economy, Ireland is very reliant on exports and external markets will be less buoyant. On top of that confidence will be eroded to some extent.

"People making investment decisions will be thinking a lot more carefully than they would have been even a month or two ago, this is likely to impact on the housing market first, with a slowing of the rate of increase."

Dr McLaughlin added that the Government's target of an £800 million surplus at the end of the year is now likely to be exceeded by about £100 million.

"This should give a current budget surplus of £2 billion if spending is held in check, which should grow to £2.7 billion next year. With capital borrowing at £1.2 billion it still leaves considerable amount of money that could be spent on infrastructure projects.

"There is no doubt that the money is there for numerous projects including a new bridge at Slane to allow easier access to the north-east," he said.