Employers' group Ibec has called for the Government to allocate an additional €1 billion for infrastructure and innovation investment in the Budget.
In its latest quarterly economic outlook, the organisation says the Government should seek further flexibility in EU fiscal rules to allow it to increase spending.
Ibec chief economist Fergal O'Brien noted that Ireland currently has the third lowest rate of capital investment in Europe.
He said the Government should spend an additional €2.5 billion in each of the next five years.
In order to do so, it will have to convince the European Commission that Ireland should be investing more in areas like transport, education and broadband.
In relation to reports that the Finance Minister intends to lower USC rates in the Budget, Mr O'Brien said that instead of spreading its resources too thinly, the Government should be reforming the entire tax system.
He said the total income tax burden is too high and should be reduced.
Ibec's Economic Outlook for the second quarter includes an up-beat assessment of the economy. It forecasts that GDP will grow by 5.3% this year and Ireland will remain the fastest growing EU economy.
It also predicts that consumer spending will rise by 2.4% this year, compared to 1.1% growth in 2014, while exports are forecast to grow by 9.1% on the back of a weak euro and strong demand.
As the economy continues to recover strongly, Ibec said that investment is set to expand by 10.2%, while unemployment should fall below 9% by the end of the year as strong jobs recovery continues.
"The Irish economy continues to perform very strongly, with GDP growth to exceed 5% this year. However we are hitting bottlenecks," Mr O'Brien stated.
"We now need to invest ambitiously in the country's future or our growth prospects will be damaged. EU fiscal rules are complex and while their principles are sound, their current application is unnecessarily restricting Ireland's and other counties' ability to invest," he added.
