There was another surge in mortgage lending by banks and building societies in December which pushed up the overall growth in borrowings.

The Central Bank said that underlying credit growth increased to 23.6 per cent at end-December from 21 per cent in November and 21.4 per cent in October.

The bank said there was a clear acceleration in mortgage growth in December. Residential mortgages increased by £468 million, recording an annual growth rate of 20 per cent compared with 15.6 per cent in November, according to its monthly figures.

Meanwhile, non-mortgage Irish pound lending rose by 23 per cent, up from 22.6 per cent the previous month. Analysts said much of the acceleration in December could be explained by seasonal factors and technical factors such as the securitisation of £200 million of mortgages in December 1996, which depressed the recorded level of lending for that month.

A spurt in borrowing before the car scrappage scheme finished at the end of last year also contributed.

Figures from the Revenue Commissioners bear this out. According to the monthly economic bulletin from the Department of Finance, the Revenue figures indicate that new car registrations last December were more than seven times the level of the same month in 1996. But despite these special factors, analysts say that lending growth remains very strong and the Irish economy shows no evidence of moving to a more modest growth path.

Some see the strong growth as cause for concern and believe it could leave Ireland susceptible to an acceleration in inflation, particularly in the event of an upswing in the global economy in the medium term. But Mr Austin Hughes, economist at Irish Intercontinental Bank, believes that the strong credit growth largely reflects the prospect of a lower interest rate environment once Ireland joins the single currency.

As a result, delaying cuts in interest rates or revaluing the Irish pound's central ERM rate would be both inadequate and inappropriate as policy responses, he says.

"It is clearly the case that the current level of Irish interest rates is not having a significant impact on the pace of lending," he says. "What is motivating borrowers now and has done for most of last year is the expected permanent lower interest rate environment inside EMU."

Other evidence of the strength of the economy is contained in data from the Department of Enterprise, Trade and Employment showing that notified redundancies last year were 9.4 per cent lower than in 1996.