THE domestic economy is catching up with the multinational sector and will be back to pre-pandemic levels next year.

The Central Bank’s quarterly bulletin shows surging IT and pharmaceutical exports pushing up overall Gross Domestic Product (GDP) by 8.3pc this year — more than two points up on its April forecast — before falling back to 5.4pc next year and 4.8pc in 2023.

However, modified domestic demand – a better measure of growth that strips out multinational effects – is forecast to grow by 3.4pc in 2021, before rising to 5.6pc in 2022 and 4.8pc in 2023, mirroring the GDP figures and bringing the indigenous economy back to pre-pandemic levels.

“As the Covid-19 restrictions have relaxed, we are seeing that domestic economic activity is rebounding,” said Mark Cassidy, the Central Bank’s director of economics and statistics.

“While the possibility of a more protracted recovery in certain sectors cannot be discounted, the prospects for the economy as a whole appear to be more favourable.”

Increased vaccination rates, monetary and fiscal supports and more upbeat consumers and businesses are all feeding into the rosier economic picture.

However, unemployment will lag the recovery, with business closures also likely if there are any further delays to the reopening plans.

“The longer that goes on, the more difficult it is for those businesses to stay open,” said Mr Cassidy.

“That contributes to longer-term effects regarding the scarring of the economy –employment turning to long-term unemployment.”

The Central Bank has also warned the Government to start lowering its debt levels soon, so it can afford future investment in housing, climate change and other priority projects.

The budget deficit is expected to peak at -9.6pc of modified gross national income (GNI, which strips out multinational effects) this year before halving next year, but gross debt will stay above 105pc of GNI until at least 2023.

“There will be trade-offs needed in the coming years,” said Mr Cassidy.

“If we’re going to deliver on all of those (priorities), then choices do need to be made between the need for revenue-raising measures or reducing in other areas of spending.”

He also said there was “very considerable uncertainty” around the hit to corporate tax revenues from a deal being hammered out today at the Organisation for Economic Co-operation and Development.