Ireland’s budget deficit fell to 4.1 per cent of gross domestic product at the end of 2014, well under an EU-set target of 5.1 per cent as it moves towards cutting it below 3 per cent by the end of this year.

The deficit fell from 5.8 per cent at the end of 2013 thanks to the final measures of a seven-year austerity drive and rapid economic growth, which at almost 5 per cent last year was the fastest rate across the EU.

The fast recovering economy has also helped cut Ireland’s public debt which the Central Statistics Office (CSO) said fell to 109.7 per cent of GDP at the end of 2014 from 114.3 per cent the previous quarter, mainly due to the early repayment of some of Dublin’s bailout loans.

Ireland, whose deficit represented more than 13 per cent of annual economic output at the height of its financial crisis four years ago, had forecast a reduction to 3.7 per cent last year before a jump in year-end government spending.

However, the government is confident that it can rely solely on economic growth while unwinding some tax hikes and spending cuts to meet its forecast of trimming the deficit to 2.7 per cent this year before eliminating it in line with EU rules by 2018.