The Central Bank has identified the biggest risks facing the Irish economy as Brexit, disruptions to global trade arrangements, overheating and high levels of indebtedness in both households and firms.
In its latest Macro-Financial Review, the Central Bank said that while the recovery of the Irish economy continues to strengthen, the risks facing it are both real and varied.
Welcoming the deal reached between UK and EU negotiators last week, the Central Bank said Brexit continues to pose a major risk to the economy as any final deal is still subject to continued negotiations which will be both "significant and complex".
"Without the detail of any final deal, it is prudent that we continue to call out the risks. Sectors such as agri-food and manufactured goods, which are highly dependent on the UK for trade, remain vulnerable," the Central Bank's deputy governor Sharon Donnery said.
She said that in the absence of a final trade deal, disruption to supply chains is also a possibility.
High levels of indebtedness in many Irish firms may also deter investment and leave them unable to raise the finance required to change their business models after Brexit.
The Central Bank also noted that a Brexit related slowdown in the UK economy could negatively affect Irish retail banks' profitability in the long term, as they have significant exposures in the UK market.
Firms relocating to Ireland as a result of Brexit are also likely to place additional pressure on an already tight Dublin property market, both residential and commercial.
The Central Bank's review also highlights the threat of overheating in the economy, as Ireland approaches full employment.
"Infrastructural deficits in transport, communications, and residential property pose a risk to growth by, on one hand, the constraint they impose on growth and, on the other, as the additional expenditure required to address them may add to overheating pressures," the bank stated.
"Ireland faces a significant challenge in financing these infrastructural gaps while avoiding overheating in the wider economy," commented Ms Donnery.
"We continue to urge prudence in public expenditure and a sensible allocation of surplus revenues between a rainy day fund and the ongoing reduction of the nation's public debt," she added.
Today's Central Bank review also noted that the household sector remains highly indebted with its debt standing at 142% of disposable income in the second quarter of 2017.
It said a large share of that debt, including mortgage debt, is susceptible to increases in interest rates, including ECB policy rates.
It also said that while the number of mortgage arrears cases continues to decline, the overal total remains large, at just under 100,000 in June 2017.
A high share of those cases (47%) are in long-term arrears of 720 days, it added.
