Stockbroker Davy has upgraded its outlook for the year and is now forecasting GDP growth of 5%, up from its previous forecast of 3.7%.

A growth rate of 5% would put the Irish economy on course to be the fastest growing in the euro zone for another year.

The stockbrokers have also pencilled in growth of 3.8% in 2018 in their latest report on the Irish economy.

Davy has predicted continued loosening of the purse strings by consumers with domestic consumption forecast to expand by almost 3.5% in the year, up from 3% last year.

While Brexit remains a threat, particularly for 2019 when negotiations end, Davy believes that the worst of the initial impact on sterling is over.

"Our base case is that a transitional Brexit deal will be agreed to avoid the worst case scenario of a hard Brexit, where World Trade Organisation (WTO) tariffs are imposed in 2019, hurting Irish exports," today's report said.

"If not, Irish GDP growth will slow sharply with agriculture, indigenous manufacturers and small and medium-sized enterprises (SMEs) particularly exposed," it warned. 

The stockbrokers are now looking at export growth of 4.5%, almost double the 2.8% growth achieved last year.

On the property market, Davy said it is expecting house price inflation of 10% for this year as the 'Help-to-Buy' scheme and the loosening of the Central Bank rules have added fresh impetus to Irish house price inflation.

"With residential transaction and mortgage approval volumes showing strong growth early in the year, we have also revised up our forecast for mortgage lending in 2017 from €6.9 billion to €7.5 billion," the stockbrokers added.