The Irish economy performed "robustly" in 2002 despite cost base pressures which threaten to undermine future economic success, the State development agency Forfás said today.
Launching its annual report, Forfás put particular emphasis on increasing competition and investment in infrastructure as crucial elements of a drive to improved growth levels.
A continued commitment to education investment was also identified as necessary to longer term prosperity.
Forfás chairman, Mr Peter Cassells, also warned of the need to "be ever vigilant about sustaining our competitiveness in terms of prices and wage costs".
While sounding cautiously optimistic about an improvement in external factors influencing the economy he said further redundancies caused by restructuring is likely to continue in the near-term.
However he was positive about job creation and pointed out that employment levels were "robust" despite the inertia in the global economy in recent times.
He said the boom of the late 90s had placed a strain on infrastructure which had affected both productivity quality of life but that gains could be expected in the medium term through infrastructure investment.
"The Mid-Term Review of the NDP [National Development Plan], which is taking place this year, provides an important opportunity to re-prioritise infrastructure projects for the coming years and to address some of the problems in the delivery of projects experienced in recent years," Mr Cassells said.
Care must be taken, he said, to ensure compliance with the Kyoto Protocol on greenhouse gas emissions does not damage competitiveness.
The introduction to the annual report said the remainder of 2003 would be "challenging" - both domestically and internationally - and that growth for the year would be "below potential" at around three per cent.
But it said a recovery is inevitable and that Ireland is well placed to exploit the resultant opportunities:
"Our economy already has many strengths - a low level of indebtedness, a strong base of modern manufacturing and internationally-trading services, a competitive taxation system, growing investment in publicly funded research, unrivalled international telecoms connectivity and an ability, because of our small size, to adapt in a timely way to changing circumstances.
Our challenge is to build on these strengths in order to respond to the changing competitive landscape and to take advantage of the opportunities that global economic recovery will offer."