The International Monetary Fund has completed its 11th review of Ireland's performance under its bailout programme.
Following the review, the IMF's executive board approved the latest tranche of funding to Ireland, worth around €770m.
The move comes ahead of a "health check" of Irish banks, which will precede European-wide banking stress tests next year.
The IMF said Ireland's economy contracted by 1.2% year-on-year in the second quarter as exports fell and domestic demand shrunk.
But more recent indicators suggest growth should pick up in the second half of the year.
The review also said that Irish banks are gradually returning to profitability.
However, it notes that they carry non-performing loans of 26.5% of their loan portfolios.