IT IS now indisputable the Irish economy is set to roar ahead over the next couple of years. Even that most cautious of institutions, the ESRI, is predicting sustainable growth of 6 per cent this year and 5 per cent in 1997. This compares with a maximum level of growth of 2 per cent among other EU states.

The ESRI predicts Ireland will meet the Maastricht criteria and be among the first group of countries to join the single currency.

The massive buying of Irish bonds in recent days confirms this is a view shared by international traders and fund managers.

Inflation, the ESRI says, will peak at 2 per cent next year. Provided strict control is kept on Government spending, there should be a "wide safety margin" under the Maastricht borrowing criterion. The annual increase in the consumer price index this year will be 1.75 per cent.

Public finances are also performing very strongly, with a substantial current budget surplus likely to be achieved in 1996.

Domestic demand is also growing more rapidly than had been anticipated. Incomes have been boosted by strong jobs growth of 36,000 this year, as well as low inflation. At the same time, the feel good factor has fed through to a fall in the savings ratio. This is partly due to consumers dipping into their savings to buy goods, particularly cars, and also to higher levels of borrowings.

The only cloud on the horizon relates to exports which have been slowing down in both the industrial and agricultural categories.

In terms of manufacturing exports, the ESRI appears sanguine. The decline, particularly in the electronics sector, will be reversed later this year as stock adjustments are completed and major export markets return to growth, it says.

The agricultural sector is a different matter. The ESRI points to the BSE crisis in the UK, as well as to falling milk prices over this year. It has identified £150 million as a permanent loss to the economy from the steep fall in average export prices.

But there is no prediction about when or if overseas beef markets will reopen. However, agricultural exports now form a much smaller proportion of the total than in the past. As a result, the fall should not prevent total visible exports rising by about 11.5 per cent in value this year.

The report also points to a strong upward trend in the repatriation of profits from Irish companies overseas, as well as a slowdown in the amount of money being repatriated by foreign multinationals.

However, these figures are distorted because of a change in the way royalties are calculated. Payments for royalties are now counted as a service import.

Employment growth will also remain buoyant, although it may slow a little, according to the report. Jobs growth this year is expected to come in at 36,000, with 28,000 next year. This should feed through to a small decline in the numbers unemployed on a Labour Force Survey basis.

For consumers the only bad news is that interest rates are unlikely to fall, according to Dr Dan McLaughlin, chief economist at Riada Stockbrokers.

"There is an argument that we should have tighter fiscal policies," he said. "With an expansionary tax cutting Budget certainly on the way and the economy motoring the way it is, the only way will be to keep the currency high and interest rates tight. There is little chance Irish interest rates will be allowed to fall, even if Germany cuts again to get growth going," he warned.

In a recent report, US investment house Morgan Stanley warned that Ireland should not have a budget deficit at all, given the high levels of growth here. Dr McLaughlin agreed. The 3 per cent limit on the budget deficit for Maastricht has been used as a cloak to hide some expansionary fiscal policies," he said. "Over the last five years the tax to GNP ratio has been broadly unchanged. So policy hasn't been expansionary by huge tax cuts."