The Central Bank has stated its concern at Ireland's high rate of inflation, warning that price increases are set to continue due to the economy's dependence on imported oil and the poor performance of exports.
However, the Bank insisted the economic outlook remains "good" for the rest of the year, with the economy expected to grow by 4.75 per cent before slowing to 4 per cent next year.
With inflation the highest in the euro zone economy, Ireland remains exposed to rising costs.
The Bank said these factors could further impact on an already declining competitiveness which is stemming the number of exports.
"Taken together, the growth of exports of goods and services has tended to lag behind world export market growth in recent years," the bank said, in its quarterly bulletin.
"This implies that Irish exports have lost market share, and this is reflected in a deterioration in the balance of payments current account. "This could become problematic if it were to persist or become larger."
The main risks to inflation stemmed from possible rises in oil prices, indirect taxes, and administered prices and particularly the threat that wage growth will pick up. Commenting on a number of high-profile job losses in the manufacturing sector last year, the bank said losses, as well as gains in the job market, "are an ongoing feature of any economy and some of the recent job losses also seem to reflect difficulties specific to particular firms."
It stressed the importance of maintaining "a favourable business climate" which would be "supportive of new business and employment creation, and that employees have the training and skills to match new employment opportunities."
The bank insisted the huge growth in the house building industry over recent years could not be maintained.
"There are already signs that housing output may have reached its peak and is starting to decline somewhat," it remarked.
"However, in the short term, planned increases in spending on infrastructure and strong non-residential construction imply that overall output of the construction sector will remain at a high level."
Private borrowings are also beginning to slow, including for residential mortgages, according to the bulletin.
In terms of the broader strength of the European economy, the Central Bank, whose governor is a member of the ECB's rate-setting Governing Council, said on the whole that growth prospects looked "bright".
"Financially, the euro area private sector is in good shape and the fact that companies are investing and hiring at a brisk pace lends credence to the view that the euro area economy has moved onto a more solid, self-sustainable growth path."