The Central Bank has said it expects the economy to grow by 2% of Gross Domestic Product (GDP) this year.
GDP measures the total output of the economy in a period such as the value of work done by employees, companies and the self-employed.
The Central Bank expects the improvement to be driven by employment growth, investment by companies and improving economic conditions in other countries.
In its latest quarterly bulletin, the Central Bank said evidence from a range of indicators suggests the recovery in the economy is continuing.
It said the clearest sign of recovery has been the growth in employment over the past five quarters.
It expects unemployment to average 11.3% this year, compared with 13.1% last year.
The bank said continued employment growth is likely to support household income and consumer confidence.
It forecasts a modest growth in consumer spending this year.
The domestic economy is also set to gain from an increase in investment, which is forecast to grow by 11% this year.
That includes a 10% growth in plant and machinery investment and a 12% growth in construction.
The bank said there is considerable scope for increased investment in residential housing.
It forecasts just 10,000 house completions this year.