THE Irish economy grew by 26 per cent between 1994 and 1996, the most vigorous upswing since modern records began, according to Davy Stockbrokers.

In its latest economic report Davy said its most recent estimates indicate the economy grew by over 10 per cent in 1995 and this will be followed by nearly 6 per cent growth this year. AIB's latest economic review also predicts 6 per cent growth in 1996. However, Davy still sees growth dipping to under 4 per cent in 1997 as investment growth slows rapidly after a couple of years of strong growth. "This should only surprise those who think that cyclical upswings last indefinitely," the brokers say.

AIB is slightly less pessimistic, forecasting 5 per cent growth in 1997.

Both also agree that inflation has been running at under 2 per cent in the first half of this year and both are predicting inflation of 2.3 per cent next year. The single biggest threat to low inflation is on the currency front. "If the pound were to fall significantly further against sterling we would have to raise that forecast," the Davy report states.

AIB also points to the necessity of maintaining low wage settlements after the PCW expires.