Ireland has been ranked as the third most competitive country in the euro area by the latest IMD World Competitiveness Rankings.
It has also been placed as the 11th most competitive economy in the world out of 63, up from 13th last year.
The development has been welcomed by the National Competitiveness Council (NCC), but it also cautioned that Ireland must not become complacent.
"We should be pleased with the findings of the IMD's Competitiveness Yearbook which showcases our improving competitiveness in an international context," said Dr Frances Ruane, chair of the NCC.
"However, we cannot be complacent and staying competitive must remain a constant focus for Government and enterprises alike."
Dr Ruane added that urgently improving the key foundations of Ireland’s competitiveness performance is a vital response to the challenges presented by current challenges such as cost pressures, trade disruption, supply chain issues and infrastructural deficits.
"Improving competitiveness and increasing productivity are essential to ensuring businesses in Ireland can compete successfully in international markets and protect the resilience of the Irish economy throughout the economic cycle," she said.
The ranking research found Ireland's improved fiscal position, ability to attract investment, and strong recovery of the labour market have contributed to the rise in its international competitiveness.
Overall, Ireland ranking improved in two out of the four core pillars of competitiveness assessed – Economic Performance, 7th (up from 22nd) and Government Efficiency, 11th (up from 13th).
However, the Business Efficiency pillar remained unchanged at 11th.
While the ranking in the Infrastructure pillar decreased from 20th last year to 23rd.
The poor performance in technological infrastructure indicators remains a concern in the context of the growing importance of the digital economy and also of remote working, the NCC said.
The report also highlighted other challenges including global price pressures, with consumer inflation listed as the biggest contributing factor to the deterioration of the economy here this year.
Capacity constraints in housing, infrastructure and construction, and the availability of talent were also highlighted.
The IMD Competitiveness Yearbook assesses and ranks 63 economies around the world based on their ability to create and maintain a competitive business environment.