Econonic growth will remain strong in 2007 with GDP expansion of 6 per cent, according to an economic commentry published today.
The National Irish Bank's inaugural quarterly comment predicts growth of 4.7 per cent in 2008.
Although there will be "significant weakness" in the construction sector, this will be offset by strong exports and consumer demand, the report predicts.
But Irish households and businesses are at risk of being hit badly by any significant downturn in the US economy, it said. "This [downturn] would adversely affect our export performance, not to mention our ability to attract US multi-nationals to invest in Ireland," according to the NIB commentary.
It says more interest rate hikes can be expected but that there are unlikely to be further hikes before Christmas in light of the recent market turmoil.
House prices are likely to remain at around the current level in nominal terms for a few years.
National Irish Bank Chief Economist Dr Ronnie O'Toole said: "A combination of robust growth in exports and consumer expenditure growth continues to generate strong national economic growth.
But he added that the "skewed" nature of economic development outside Ireland's urban centres over the last decade, led by strong growth in construction, has left these regions vulnerable to the falloff in house building.
The other major employer in these areas is agriculture, which will also face ongoing declines in employment, Dr O'Toole said.
The Economic and Social Research Institute (ESRI) forecast last week that the economy would grow by 4.4 per cent this year, compared to its forecast of 4.8 per cent three months ago.
It has revised its economic growth forecast for 2008 down to 2.9 per cent from the 3.7 per cent it predicted in June.
The ESRI said the number of new houses completed this year would fall to 76,000 this year and 65,000 in 2008, lower than it had previously thought.
