Bank of Ireland is forecasting economic growth of 2.8% this year rising to 3.4% next year.

In its latest economic outlook, the bank says prospects for the second quarter look good after the year got off to a strong start with GDP and GNP recording solid growth and continued momentum on the job creation front.

It said there were positive signals from export order books, industrial production data and retail sales.

The bank said improving external demand, favourable exchange rate movements and the waning impact of the patent cliff were expected to underpin export growth, with domestic activity and the continuing recovery in the property market providing additional support to investment.

It also foresees an improvement in consumer spending as confidence and employment gains feed through.

"The recovery path that we are witnessing is in keeping with what we would expect for a small open economy like Ireland," Loretta O’Sullivan, Bank of Ireland's Chief Economist said.

"The starting point is a rebound in exports, which leads to a pick-up in investment. This supports employment growth which in turn, and in time, underpins an improvement in consumer spending."