The Economic and Social Research Institute is forecasting double-digit growth in the economy this year.
In its latest Quarterly Survey, the ESRI predicts the economy will grow by just over 11% mainly due to strong demand for exports.
The ESRI believes the recovery in the economy is well under way and will pick up pace in the second half of this year.
Strong demand for exports of medical and pharmaceutical products as well as computer services is expected to push growth in GDP terms to 11.1% this year. Growth in the domestic economy is expected to be 6.4%.
Unemployment, however, is still expected to average out at just over 16% this year before falling to just over 7% next year.
The ESRI has restated its view that favourable growth and financing conditions gives the Government more leeway to borrow additional funds to invest in housing, although it does support a return to normal levels of current spending on services.
The report also estimates that the potential loss to the economy from Covid-19 is approximately €24 billion. This is based on the output that otherwise would have happened in the economy, if there had been no pandemic emergency.
The report also notes that the impact of Covid-19 has been uneven across the economy. It notes that over 70% of small and medium sized companies saw a drop in sales during the first wave of the pandemic. It says many of these firms may experience a rebound in the second half of this year which will prove critical to their survival.
By contrast, demand continues to grow for medical and pharmaceutical exports and exports of computer services. Both sectors are dominated by multinational companies.
Medical and pharmaceutical products account for around 40% of the value of goods exports and grew by 9.2% on an annual basis. Computer services account for 61% of total service exports and grew by 20.7% in the year to the end of March.
The Quarterly also notes that stricter trade rules between the UK and the EU will “almost certainly have a negative impact on trade”, even though there is still “a significant degree of uncertainty” over the timing of future Customs checks and the Northern Ireland Protocol.
Ireland recorded a €1.3bn trade surplus in goods with the UK in the first three months of this year. Goods imports from Great Britain declined over the same period by 47.6% or €2bn while exports to Great Britain declined by just 2.6%.
Over the same time period, exports to Northern Ireland grew by 22.4% while imports from Northern Ireland grew by 44.2% or €82m.
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