The International Monetary Fund (IMF) says that there is a risk of a sharp decline in Irish house prices, despite the recent slowdown in prices.
It has also warned that Irish households are not saving enough for retirement and that better regulation is needed to stimulate competition in the banking, retail, insurance professional services and retail.
The IMF says Irish economic performance has been impressive and that rapid employment growth has been supported by immigration.
The internatioal body based its report upon meetings with government, Central Bank, IFSRA and employers' and union representatives in Dublin in May.
It said that growth in the Irish economy picked up last year, in line with the global cycle and that economic growth is likely to be very strong in the short term.
However, it warned that the Irish economy is at about full employment and that rapid growth could lead to overheating.
It remarked that labour market flexibility is good in Ireland, but that because of high labour costs, wage moderation is needed in both the national wage agreement and the next public sector benchmarking exercise.
Reacting to the IMF's review, the Minister for Finance, Brian Cowen said that he noted the IMF's concerns about the erosion of competitiveness and said that regaining competitiveness is vital if Ireland is to maintain its economic growth.
Minister Cowen said that wage moderation was needed in the upcoming national pay talks. He said that any pay increases will result in job losses unless they are offset by higher productivity.
