Stockbroker Davy has doubled its forecast for growth in the economy this year and lowered its forecast for inflation.

In a research note, Davy's chief economist Conall MacCoille forecasts the economy will grow in GDP terms by 6.9% this year compared to an earlier forecast of 3.5%. Davy also expects growth of 5% in 2024.

Official forecasts for this year published by the Department of Finance at Budget time last September are for the economy measured by GDP to grow by 4.7% this year.

Forecasts for Modified Domestic Demand, which strips out the performance of multinationals, is for growth of 1.2%.

Davy predicts inflation will slow to an average of 4.7% this year. Official forecasts are for inflation to persist at an average of 7.1%. These forecasts will be updated in April.

The reasons given by Davy for its growth upgrade are that the economy performed better than expected in the last three months of last year with initial estimates published earlier this week that GDP grew by 3.5% in the final quarter.

The report also says energy prices have been lower than forecast and that the global outlook 'looks a little less challenging’ with Europe ‘potentially avoiding a recession.’

On housing, Davy predicts that completions will slow resulting in 27,500 units being built.

It expects residential house price inflation to slow to 4% this year but says a ‘key uncertainty’ remains what happens as a result of the loosening of the Central Bank’s mortgage lending rules.

It says it’s possible ‘given the intensity of competition in the housing market’ that first-time buyers may take on more debt and push prices higher than its 4% forecast.