The Central Bank has changed its forecast for growth in the economy, saying it now expects it to outperform what it previously thought.

In its quarterly bulletin it says GDP of 4.1% is now expected for 2015 - up 0.3% on its previous forecast three months ago.

It is also predicting growth of 4.2% next year, which is a full half percentage point higher than previous forecasts.

The Central Bank says the government does not need to do anything to stimulate growth and that extra revenues should be used for debt reduction rather than for any pre-election giveaway.

The bank says the momentum of domestic recovery has strengthened and the outlook is now more favourable.

"Further increases in employment, rising real disposable incomes and gradually strengthening consumer confidence are projected to support a pick-up in the growth of consumer spending over the remainder of 2015 and 2016."

It says growth in investment spending is forecast to strengthen further - helping investment, including construction investment, to continue to rebound.

"These developments suggest a stronger outlook for growth in 2015 and 2016, as compared to the forecasts in the previous bulletin", it says.

But it also warns that high levels of household debt remain "a headwind to any strong recovery in consumption."