Buoyant consumer spending and the increasingly competitive global economy narrowed Ireland's trade surplus with the rest of the world, according to the latest trade figures.
The preliminary figures released by the Central Statistics Office show that merchandise exports grew by 5.3 per cent to €88.6 billion in 2005. But imported goods grew at twice that pace, coming in at €56.4 billion from the previous year's €51 billion.
Imports were boosted by strong consumer demand for durable goods, especially new cars, of which sales rose 11 per cent last year.
Machinery and equipment investment rebounded strongly after a number of relatively sluggish years as service firms raised investment in IT.
In contrast, exporters struggled to maintain market share in a relatively buoyant global trade environment as higher costs weakened Ireland's competitiveness.
However there are indications that exporters finished the year strongly and this momentum was sustained into 2006.
The three month moving average which gives a better indication of market trends shows that goods exports rose by 10.3 per cent in the last three months of 2005.
This was the strongest growth in exports recorded since May 2002.