Strong growth in investment is leading to an acceleration in domestic demand, according to a report by Goodbody Stockbrokers.

In its latest economic outlook, the firm says it expects continued growth in the coming months largely spurred by business investments and a recovery in the property market.

However it says the Government should continue on its plan to cut the deficit further in Budget 2015 and avoid the “temptation to ease back on austerity”.

“Stronger domestic momentum means that budget deficit targets look readily achievable but it would be wrong to suggest that the job is done,” said Goodbody’s chief economist Dermot O’Leary.

The debt level will fall in 2014 for the first time in a decade, but at 122%, Irish sovereign debt remains high in both an historical and international context.  At this level, Ireland does not have much room for manoeuvre in the event of another international shock, such as a long period of low inflation or even deflation in the euro area.”

Goodbody is maintaining its GDP forecasts for this year and the next, which it places at 2.6% and 3.1% respectively.

Within that it anticipates domestic demand to grow by 2.5% in 2014 and 2.7% in 2015.

However the stockbroker’s report says that market distortions, such as the ongoing patent cliff and the re-domiciling of foreign firms to Ireland, has made both GDP and GNP figures increasingly irrelevant gauges of real economic activity.