New figures from the Central Statistics Office show that the economy grew in the three months from July to the end of September.
The CSO said that both measures of economic growth - gross domestic product and gross national product - were positive for the first time since the last quarter of 2007.
GDP - which includes profits from multi-national companies - rose by 0.5% compared with the second quarter, while GNP increased by 1.1%. The CSO said money earned by Irish-based companies abroad had a big influence on the GNP figures.
Growth was led by exports, which rose by 3.6% in the quarter and outweighed further falls in domestic demand. Consumer spending fell by 0.5%, while capital investment dropped by more than 18%. But the industrial sector grew by 1.4% in the three months, despite an 8.2% drop in building and construction output.
On an annual basis, GDP fell by 0.5% while GNP was down 1.6% compared with the third quarter of 2009.
Finance Minister Brian Lenihan welcomed the figures, saying the economy had stabilised and was now on an 'export-led growth path'. He said the Budget day forecast of 1.7% growth for next year remained on track.
NCB economist Brian Devine says the Government's growth forecast for next year of 1% (GNP) and 1.7% (GDP) are now 'achievable and well within the bounds of a plausible outcome'.
He said that NCB expected domestic demand to fall by more than the Government's forecast next year but added that it was also expecting a positive contribution from net exports.
Goodbody economist Dermot O'Leary said the figures again confirmed that there was a two-speed economy in Ireland. 'Domestic demand continues to contract while the export sectors contribute strongly to growth,' he said. Goodbody had been expecting a slight increase in GDP this year, but now believes it may be 'a slight negative'.
Separate CSO figures also show that there was a surplus of €255m on the current account of the balance of payments in the third quarter of 2010.
This compares with deficits of €1,142m in the previous quarter and €653m in the same quarter last year. This was mainly due to an increase in the merchandise surplus, boosted by strong growth in exports. The balance of payments measures flows of income into and out of the economy.
