Irish economic growth should recover slowly moving into next year, although considerable risks remain, according to the Economist Intelligence Unit (EIU).
However, its analysts believe the Government's political fortunes may be slower to recover and that poor performances in next year's local and European elections "could spell trouble for the Taoiseach".
Its latest country report for the Republic says that gross domestic product (GDP) should grow by 3 per cent this year, rising to 3.7 per cent next year as the international upturn gathers pace.
However, it warns that "the downside risks to our growth forecasts are considerable". Given the State's high dependence on the US for exports and as a source of investment, "any renewed slump in the world's largest economy or a further sustained weakening of the dollar would have a disproportionate effect on growth prospects in Ireland relative to any other European economy".
A sharp slowdown in consumption in the UK could also hit growth here, the report warns.
It adds that the main domestic risk "is centred on the danger of a sharper-than-projected retrenchment in consumer spending", which could result from higher unemployment or tax increases.
The EIU's analysis carries influence with its international client base. As well as an economic analysis, it also provides a political assessment and foresees possible pressure for the Taoiseach, Mr Ahern, to stand down.
"That an obvious successor exists, in the shape of the Minister for Foreign Affairs, and party favourite, Brian Cowen, is likely to make a challenge all the more possible," the study says, arguing that "for the first time Mr Ahern has become a liability to his party".
Looking to the economy, budgetary constraints will continue to require slowing spending growth, it says, "and there will be further tax increases".
It adds: "Although the Government is, in theory, pro-business and in favour of competition, delay and inactivity in a range of policy areas have marked much of its first year since re-election."
The pace of reform may now accelerate, it says, referring to efforts by the Minister for Transport, Mr Brennan, to reform CIÉ and Aer Rianta.
