The Taoiseach, Mr Ahern, has warned that although economic indicators provide grounds for confidence in the strength of the Irish economy, the Government needs to maintain prudent policies to safeguard competitiveness.

Addressing the Institute of Bankers in Dublin yesterday, Mr Ahern said the Irish economy was adjusting to a more sustainable pace of growth of up to 5 per cent in the medium term, well above the EU average. He said successfully managing that adjustment was at the heart of the Government's economic strategy.

"I do not want this to sound as if every silver lining has a cloud, but we do need to keep things in perspective.

"One of our failings 30 years ago was that we perhaps spent our good fortune before we earned it. Let us learn from that and measure our actions and expectations accordingly for the period ahead," he said.

The Taoiseach said he was heartened that the ESRI's projections for acceleration in output growth in 2004 and 2005 remained significant and that inflation would continue to moderate.

The resilience of the Irish economy had been tested in recent years during the global downturn economy, he said, noting that Ireland's economy was one of the world's strongest.

Recent positive economic indicators show inflation is at its lowest level for four years and show a strong pick-up in growth towards the end of last year, with GNP growing at 5.5 per cent in the final quarter, said Mr Ahern.

He said Live Register figures issued yesterday showed unemployment still well below the EU average, while the first-quarter Exchequer figures signalled that the public finances were in a healthy position and on a sustainable path for the future.

"These figures are the envy of our competitors. These indicators demonstrate that the Government's economic policies are working. They are the right policies for Ireland's future. They show how prudent policies and the right action by Government, at the right time, can secure the welfare of all of us."

Mr Ahern said jobs had been safeguarded and that the economy's ability to create more jobs had not been jeopardised so far. He said the only way to build on this was to remain competitive.

"We are one of the most globalised economies in the world and we should have nothing to fear from global competition. We look forward to the enlargement of the European Union as an opportunity," he told the institute members.