A European Commission report says Ireland has made "important progress" on the public finances, the banks and economic reform measures.
In a report following its latest review of the EU/IMF bailout programme, the Commission said there would be a gradual return to positive economic growth this year, while the budget deficit was expected to be well below the 10.5% of GDP target.
The report added that the recapitalisation of the banks had been completed at a significantly lower cost to the State than originally anticipated.
The Commission welcomed the Government's intention to publish a three-year plan outlining the measures it planned to take to reduce the deficit to 3% of GDP by 2015.
It said "early specification" of the plans would help sustain recent improvements in market sentiment towards Ireland.
The Commission left its GDP growth forecasts unchanged at 0.6% this year and 1.9% in 2012. However, it now expects a bigger fall of 2.4% in private spending this year. The previous forecast was for a 1.9% drop.
The Commission lowered its unemployment rate forecast for this year slightly - from 14.5% to 14.3% - but warned that the rising figures for long-term unemployment needed "considerable attention".
It said the main risks to Ireland's performance were uncertainty about the broader eurozone debt crisis and the effects of a weaker global economy on exports.
