The Central Bank has said the country's macro-financial environment continues to improve with strong growth last year and growth projected for both this year and next.
But in its latest Macro-Financial Review, the Central Bank cautioned that external risks remain a threat to the economy.
The bank said the main risks include the outcome of the UK referendum on European Union membership, the migrant crisis in Europe and geopolitical tensions.
It said that prospects for global growth remain relatively subdued, while international financial markets have been volatile in recent months.
In its latest review, the Central Bank said that while economic conditions here are improving, the level of public and private sector debt remains high. This leaves households vulnerable to adverse movements in income or interest rates.
It advised that "maintaining fiscal discipline is necessary to keep the public finances on a sustainable path."
On the banking sector, today's review said that bank capital has improved with domestic banks seeing a return to profit, however it cautioned that this varies according to the individual bank.
It also noted that while the workout of impaired loans and the disposal of non-performing loans continues, non-performing loans and their related provisions remain "elevated".
MFR: Read the key messages https://t.co/QB9jsvh5MG pic.twitter.com/scBZ1FNKAO
— CentralBankofIreland (@centralbank_ie) June 14, 2016
Meanwhile, the domestic non-life sector is facing a difficult operating environment with all of the major firms reported underwriting losses last year mainly due to the challenges in the Irish motor market.
On Brexit, the Central Bank said that a vote by the UK to leave the Eurpean Union would have both short-term and long-term impacts on Ireland, while a negative impact on Irish exports to the UK could be expected.
It said that it has been engaging with financial sector firms to assess their preparedness for the risks associated with Brexit.
The Central Bank also announced today details of its consultation process on the mortgage rules introduced last year.
The loan-to-income and loan-to-value rules brought in last year by the Central Bank are designed to make the financial system safer, and prevent consumers overloading themselves with debt.
But they have been criticised by property industry groups for depressing the growth of house prices, and ultimately holding back the construction of more houses.
The Central Bank said today that it welcomed "data-based and other analytical submissions" to inform its assessment on the rules.
The submission period will be open for eight weeks from 15 June to 10 August.
Speaking at the publication of the review, the Central Bank's Deputy Governor Sharon Donnery said the mortgage rules were enacted to enhance the resilience of households and banks to financial shocks.
"We acknowledge that our measures impact individuals' ability to access credit and purchase houses. However, these loan-to-value and loan-to-income ratio limits are designed to protect the system as a whole and limit the risk of a house price - credit cycle emerging once again," Ms Donnery said.
MFR: 'Call for Evidence' - Mortgage Lending Rules https://t.co/QB9jsvh5MG pic.twitter.com/2zYZZfHJXx
— CentralBankofIreland (@centralbank_ie) June 14, 2016
"In this context, we must take a medium to long term view. The measures were introduced as a permanent and structural feature of the Irish mortgage market and the evidence threshold to justify adjustments to these rules is significant," she stated.
"While the housing shortage is widely acknowledged, housing shortfall issues must primarily be addressed by other targeted policies," she added.
