The Irish economy will grow by 3.5% this year and 3.6% in 2016, the European Commission has forecast.

This will give Ireland the fastest growth in the European Union and well above the forecast 1.3% growth for the euro zone.

Earlier in the week the Central Bank raised its growth forecasts to 3.7% this year and 3.8% in 2016.

In its Winter Economic Forecasts, the European Commission said that Ireland's gross domestic product grew by 4.8% in 2014 - well ahead of the rest of the bloc.

It also forecast a continued fall in unemployment in the country, with the figure falling to 9.6% this year and 8.8% in 2016.

Live Register figures released yesterday put the unemployment rate at 10.5% in January.

On the wider euro zone, the commission said the bloc's economic prospects were brighter now than three months ago thanks to cheaper oil, a weaker euro and the European Central Bank's quantitative easing.

The EU executive arm raised its forecasts for gross domestic product expansion in the 19 countries sharing the euro to 1.3% this year from the 1.1% seen in November and to 1.9% in 2016 from an earlier 1.7%.

Growth last year was 0.8%, the Commission said.

"Europe's economic outlook is a little brighter today than when we presented our last forecasts," said Pierre Moscovici, Commissioner for Economic and Financial Affairs, referring to forecasts released in early November 2014.

Growth will also benefit from a recovery in investment. 

The Commission sees it increasing 2% this year over 2014 and by 4.4% in 2016, boosted by the ECB's money-printing measures and the European Union's €315bn investment plan.

Investment grew by just 0.9% in 2014.

"The fall in oil prices and the cheaper euro are providing a welcome shot in the arm for the EU economy. Meanwhile, the Investment Plan for Europe and the ECB's important recent decisions will help create a more supportive backdrop for reforms and smart fiscal policies," he said.

Oil prices more than halved since the middle of last year, lowering costs for eurozone companies and households and the euro weakened 18% against the dollar as ECB loosened monetary policy to prevent deflation.

The central bank wants to keep inflation below, but close to 2% and announced last month it would buy government bonds on the secondary market to inject more than €1 trillion into the economy and make prices go up.

The Commission forecast that consumer prices in the eurozone would fall 0.1% this year after a mere 0.4% increase in 2014, but will then rise by 1.3% in 2016.

Eurozone unemployment is set to fall to 11.2% of the workforce this year from 11.6% in 2014 and continue dropping to 10.6% in 2016 as the economy gathers pace.

"The right economic conditions are in place for sustained growth and job creation. Following the difficult policy choices governments have made due to the crisis, the effects of reforms are emerging," said Valdis Dombrovskis, Commission vice president responsible for the euro.

"We have to step up the reform momentum to strengthen the recovery and make sure it translates into money in people's pockets," he said.