The International Monetary Fund expects the Irish economy to continue growing strongly over the next couple of years, predicting that gross national product (GNP) will expand by 6.2% this year.
But in its latest report on the economy, the IMF says growth has become 'increasingly unbalanced' in recent years, with heavy reliance on building investment, sharp increases in house prices and rapid credit growth.
It also says the expansion of the labour-intensive building and services sectors has led to a fall in productivity. The IMF adds that a stronger euro, along with faster wage growth compared with competitors, has affected competitiveness. It says exports' contribution to economic growth has fallen steadily since 2001.
The IMF says that while an easing of construction growth to a more sustainable size is likely to be smooth, what it calls 'an abrupt correction' can not be ruled out.
On the public finances, the report urges the Government to keep public spending growth to a rate slightly below economic growth, though it acknowledges that further increases were needed to improve public services.
