The Central Bank is forecasting growth of 3.25% for the Irish economy this year, describing the prospects as 'reasonably positive'.
But it says that despite the recent sharp fall in inflation, the situation is 'far from ideal'. The bank's Spring Bulletin points out that inflation in the services sector will still be running at around 3.75% this year, adding that there is some way to go before 'a culture of price stability' is achieved.
The Central Bank says the economy's competitiveness has 'worsened significantly' over the past couple of years. It says the euro's rise has been significant, but argues that the exchange rate's previous weakness had only masked a deterioration which had already begun.
It says labour costs will be crucial, adding that the forthcoming national pay talks should take account of low inflation and the need to absorb the likely increase of 2% in the labour force.
The bank's report describes the public finances as 'robust', welcoming the Budget commitment to contain public spending.
