Unemployment is expected to fall to 5.6%

The Government is being warned not to bring in any major income tax cuts in the next budget.

A report from the ESRI think-tank says the economy is showing signs of overheating and we need to be careful not to stoke it.

The ESRI’s latest Quarterly Economic Commentary says that GDP is expected to grow by 4.7% in 2018, followed by 3.9% in 2019.

But those forecasts make a "technical assumption" that a European Economic Agreement (EEA) will be made between the UK and the EU.

While unemployment is expected to decline to 5.6% in 2018 and 5.0% in 2019.

Paschal Donohoe | File photo

It's also urging Finance Minister Paschal Donohoe to watch credit growth.

He'll publish the Government's Summer Economic Statement later, with a guideline on state spending for 2019.

Professor Kieran McQuinn from the ESRI says there's little room for tax cuts.

"What we would suggest is, from the budgetary point of view, is that really given that the Government is committed to a fairly significant increase in investment over the coming years, there's little or no space for the Government to increase or stimulate economic activity by cutting taxes".