The Irish economy will see a post-Covid growth surge which is expected to create 160,000 jobs over the next two years, reducing unemployment to below 6 per cent, according to the Central Bank.

Its latest bulletin predicts growth of 15.3 per cent this year, and 7.2 per cent next year on the back of a rapid resurgence in consumer spending linked to €16.2 billion of excess savings built up during the pandemic.

It warned that businesses and households are facing higher costs due to pent-up demand and supply bottlenecks, The Irish Times reports.

These factors are leading to higher transport, energy and input costs across the economy, along with demands for higher wages in line with the increased cost of living.

The report predicts average earnings will rise by 5.1 per cent this year, due to labour shortages in different sectors, particularly construction

“As the easing of public health restrictions continues the rebound in the Irish economy in recent months is expected to be followed by a sustained period of robust growth,” the Central Bank said.

“Domestic consumption, investment and employment are currently growing at a pace at or above what was expected at the time of the last bulletin,” it said.

Domestic economic activity is expected to return to pre-pandemic levels this year, while it should return to where it would have been in the absence of the pandemic by 2023.

It predicted the recovering economy would create 160,000 new jobs over the forecast period out to 2023, which will result in an unemployment rate of 5.9 per cent.

The Covid-adjusted unemployment rate currently stands at 12.4 per cent.

However, their will be “some persistence” in the unemployment rate as some sectors will take longer to recover and return to pre-Covid levels of employment.

The Central Bank also warned that the Government’s pandemic spending posed a risk to public finances

While not directly criticising the Government’s budgetary strategy, the Central Banks director of economics and statistics Mark Cassidy said that “by putting more money into the economy than you’re taking out – which is what a budget deficit does – you are increasing demand pressures at a time when the economy is getting back towards capacity at a faster rate than we thought”.