DUBLIN (Reuters) - Ireland's economy grew 1.5 percent in the second quarter to rise a whopping 7.7 percent from a year ago, levels that economists said may allow the government to raise again growth forecasts it just upgraded last week.
Less than 12 months out of a three-year EU/IMF bailout, Ireland is bucking the trend in the euro zone's stalled recovery. Employment is growing strongly, exports are rebounding and consumers are beginning to spend again.
The bright start saw gross domestic product (GDP) grow 2.8 percent quarter-on-quarter in the first three months of the year, before the second quarter rise that significantly beat the 0.5 percent fall expected by economists polled by Reuters.
"The GDP data is finally reflecting the evidence from the surveys and the PMIs that the economy is recovering really rapidly," said Conall Mac Coille, chief economist at Davy Stockbrokers.
"Every part of the economy - the export sector, construction, consumer spending - it's all picking up together and that's giving you these really strong growth rates."
Mac Coille said GDP growth of at least 4 percent was likely for the year as a whole and that if GDP was flat for the second half of the year, 5 percent growth would not be out of the question.
KBC Bank Ireland chief economist Austin Hughest also said 4 percent growth was now on the cards.
Ireland's finance minister said last week the government expected the economy to grow slightly more than 3 percent this year compared with an earlier forecast of 2.1 percent. It had been stuck in neutral for the past two years.
While there are definite signs of a substantive turnaround from the crisis that forced Ireland to seek aid four years ago, new EU calculation methods have also helped. They put the Irish economy at about 6 percent larger than previously estimated.
The jump in the second quarter from a year ago was driven by a 13 percent increase in exports. Personal consumption rose by 1.8 percent year-on-year, the largest annual rise in almost four years.
With Ireland's budget deficit also forecast to fall to or below 4 percent of GDP this year, well ahead of target, the government has said it will ease up significantly on further austerity measures in next month's budget.
Ireland, which was locked out of bond markets this time four years ahead when the cost of raising funds rocketed, also sold debt at a yield of zero percent for the first time ever on Thursday when investors snapped up three-month treasury bills.
"This is the strongest growth rate recorded since the early 2000s and shows that the strong and stable recovery in the Irish economy is well under way," Finance Minister Michael Noonan said in a statement.
"The Government remains committed to building upon and sustaining this recovery and we will do nothing that will put it at risk."
Reporting by Padraic Halpin; Editing by Larry King