Irish companies are set to increase investing in their businesses and in their workforce as levels of optimism about the economic outlook continues to strengthen.

The latest Grant Thornton International Business Report for 2013 shows that 36% of senior Irish bosses are optimistic about the country's economic prospects, up from 30% last year.

The report surveys 44 countries.

The improving trend in Ireland compares to an average of 27% across the European Union, down 2% on the previous year.

Grant Thornton says this indicates that many of our EU partners have been slower to adapt to the ''painful realities of fiscal and structural reform''.

92% of Irish firms are also expecting employment to increase or remain the same this year, a sharp increase from last year's level of 68%. The survey also found that businesses are more willing to invest in research and new equipment and machinery than last year.

But despite the increased optimism, Grant Thornton said the Irish economy has a long way to go before it could be said that it has returned to robust growth.

Businesses are facing the key challenges of higher taxes, public sector pension deficit and weak consumer spending.

''It continues to be a two speed economy, with the export sector showing growth, but the domestic economy remaining weak,'' commented Grant Thornton's Patrick Burke.

''The announcements of jobs created last year form Enterprise Ireland and the IDA in recent days are welcome, but a significant drop in the unemployment rate from its current level of 14.6% will be years in coming, rather than months,'' he added.