The Central Bank expects the economy to exit the recession in the second half of this year, led by growth in the export sector.
The prediction comes in the bank's first quarterly bulletin of the year and it is in line with the general economic consensus on the Irish economy.
It has also revised down its unemployment estimate to an average of 14.5% for the year ahead.
However, the Central Bank says competitiveness is the real key to economic recovery in Ireland.
It has warned that wage restraint must become the norm across all sectors if the Irish economy is to properly recover.
It singles out Irish professional fees as very high and says healthcare, health insurance, utilities and public transport all cost too much in Ireland.
The Central Bank says that future growth must come from internationally traded activities, not what it calls unbalanced domestic developments, in other words property booms.
