The International Monetary Fund has urged the Government to reduce inflation and improve competitiveness.
In its annual review of the Irish economy, the Fund commended the authorities here for their 'exemplary track record of sound economic policies'.
However, it warned that the likelihood of sustained slower growth in the period ahead calls for a sharper policy focus.
The IMF projects a gradual recovery in economic growth here in line with the expected pick up in global growth.
But the Fund also warns that there is a 'significant risk' that house prices could be overvalued, and that a sharp rise in unemployment could pose risks to the housing market.
In a statement, the Minister for Finance, Charlie McCreevy, welcomed the IMF assessment.
Mr McCreevy said he agreed that the likelihood of slower growth in the period ahead requires the country to get its prices and cost increases more in line with its EU partners.
