Foreign direct investment remains pivotal to Ireland's economic growth, according to international ratings agency Moody's Investors Service.
In its 2006 credit analysis, Moody's described the Irish economy as resilient, flexible and characterised by high growth rates. However, despite the State's considerable strengths, foreign direct investment levels declined over the past two years, Moody's noted.
This is due primarily to the redistribution of funds by multinationals based here, for example through the temporary repatriation of profits by US companies.
Nevertheless, Alexander Kockerbeck, vice-president of Moody's, said Ireland was continuing to attract high-tech and biomedical investment due to its highly skilled workforce, high productivity and attractive government incentive policy.
He warned that EU enlargement represented a challenge to Ireland's continued attractiveness as an investment location.
"One point of concern for international cost competitiveness is the Irish inflation differential with the euro zone," Mr Kockerbeck said.
Irish wage increases have outpaced productivity growth since 2000, indicating a deterioration in the country's competitiveness.
Moody's report also highlighted infrastructural bottlenecks as an issue, but it recognised that the current deficit was being addressed by authorities.
The agency also reported imbalances in the "growth composition" of the economy, which it said was heavily based on domestic demand.
In relation to the property sector, Mr Kockerbeck said high levels of household debt and the possibility of a price correction in the market represented significant risk factors should "adverse shocks" occur.
Maturing SSIAs and infrastructural needs would ensure that the construction sector continued to perform strongly, he said.
The Government was praised for keeping budget balances "well under control", in contrast to other euro-zone governments.
Ireland's foreign currency country ceiling for bonds carries Moody's AAA rating, which represents the lowest risk of default.
