DUBLIN Ireland intends to increase core public expenditure by 6.1% next year in an overall budget package of 6.4 billion euros ($6.98 billion), according to its Summer Economic Statement.

Two years ago, the government said it would try to anchor expenditure growth to the growth rate of the economy, at around 5% per year, but suspended that policy this year with a 6.5% increase.

Finance Minister Michael McGrath said the proposed spending increases "will allow the government to provide the level of investment that we believe is necessary to maintain public services and protect incomes, without adding unduly to inflationary pressures".

"The rule has to be flexible, it has to be adapted to meet the circumstances of the time", he said.

The finance ministry estimated in April that one of the few current budget surpluses in Europe would reach 6.3% of national income by 2026 thanks to soaring corporate tax receipts, meaning the state's finances can easily fund additional budget spending.

However Ireland's central bank and independent fiscal watchdog had both urged the government to stick to the 5% spending rule, with the central bank warning that it risked "significantly" adding to inflation and overheating the economy.

While Irish inflation has halved in the last nine months to 4.8%, according to preliminary data last week, core inflation is stuck at 5.7% and the central bank only expects the closely watched underlying measure to peak later this year.

The Irish economy is also expected to expand strongly again this year after being the fastest growing across the EU in 2022, with unemployment recently falling to a record low of 3.8%.

($1 = 0.9175 euros)

(Reporting by Graham Fahy and Padraic Halpin; Editing by Emelia Sithole-Matarise and Gareth Jones)