The Irish economy will grow by 5.3 per cent in 2007 before slowing to 4.3 per cent in 2008, according to the European Commission's autumn economic forecasts.
In its assessment of the Irish economy in 2007, the commission revised up its previous growth forecast of 5.1 per cent, significantly ahead of the 2.1 per cent average forecast for the euro zone area.
Between 2006-2008 the EU is expected to create seven million new jobs. For Ireland, the commission's survey expects employment growth to remain strong at 4.4 per cent for this year.
Significant inward migration is expected to fuel labour force growth until 2008 when, the commission notes: "new additions to the labour force are not expected to be matched fully by employment growth in 2008".
This is expected to result in a slightly higher unemployment rate of 4.75 per cent in 2008, compared with the 4.25 per cent at the moment.
After peaking at around 9 per cent in 2004 in both EU and euro area areas, the unemployment rate is set to decline in 2006 to around 8 per cent in both areas and to fall further to 7.3 per cent in the EU and 7.4 per cent in the euro area by 2008.
This year the Irish Exchequer is expected to have a surplus of 1.2 per cent as a result of buoyant tax returns from property and lower-than-expected capital outlays.
However, over the next two years the commission report predicts that the budget surplus will fall to 0.9 per cent and then 0.4 per cent in 2008.
It also warns of macroeconomic risks which have the potential to significantly worsen the general Government balance.