The Government has today raised the country's gross domestic product (GDP) forecasts for the next four years.

In its latest Stability Programme Update - which covers the years from 2018 to 2021 - the Government is predicting growth of 5.6% this year and 4% next year, driven by strong growth in employment, which is set to pass its pre-crisis peak this year.

It had previously predicted GDP growth of 3.5% for 2018 and 3.2% for 2019.

The sharp upgrade for this year surpasses the Central Bank's forecast that last week increased its GDP prediction to 4.8%. The Central Bank also predicts growth of 4.2% for 2019.

Statistical distortions related to Ireland's multinational sector have called into questioned the relevance of using GDP to properly measure activity in the Irish economy and many economists instead rely on the labour market as a more accurate barometer.

The Stability Programme Update said that unemployment is set to fall to 5.8% this year from a high of 16% in 2012.

The jobless rate is forecast to remain at 5.3% over the following two years as the economy reaches full employment.

The Minister for Finance said the short-term outlook for the economy is positive and this is delivering gains in the labour market.

Paschal Donohoe said that in the first half of this year, the level of employment will rise above its pre-crisis peak, a sure sign of the distance the country has travelled.

But he cautioned that the country's "hard-won gains" cannot be taken for granted.

"Geopolitical factors that have the potential to negatively impact growth; disruption to world trade and the effect that could have on the global economy; policy uncertainty in the US and, of course, Brexit, all have the potential to damage future economic conditions," Mr Donohoe said.

"It is imperative, therefore, that we continue to prudently manage the economy and the public finances in an increasingly uncertain world," he added.