BARCLAYS has given its approval to the fiscal adjustment in Ireland, but warns more challenges remain before the economy will truly be on the "road to recovery".
In a research note to clients, the banking giant praised the country's "assiduous implementation of reforms, both prior to and under the EU/ECB/ IMF programme" but claimed recovery was "unlikely to be easy".
The report highlights the restructuring of the banks, use of NAMA and the broadening of the tax base for praise.
"Despite good progress to date [however], the road to recovery is long and unlikely to be easy.
"The banks may be well-capitalised, but they are unprofitable and continue to rein in credit. With property prices still falling, arrears increasing, unemployment high and external demand weak, the macro-financial backdrop is highly unsupportive.
"The public deficit is expected to be more than 8pc of GDP this year, making the plan to cut it to 3pc by 2015 an ambitious one.
"The placement of Ireland at the safer end of the crisis economy scale reflects the view that Ireland's reform agenda is credible and on track. Ireland has pressed ahead with important reforms and has generally met its targets.
"These have been spread across the banking sector, fiscal consolidation and structural reform to restore competitiveness," says the bank.
Despite broadly praising the decisions Ireland has taken since the economy began to collapse five years ago, the lender's analysts, Simon Hayes and Blerina Uruci, question whether the progress will be sustainable, given the issues in the wider euro area.
"Ireland's recovery remains highly dependent on strong exports and a stable financial environment. The ongoing fragility of global activity and the slow and erratic progress in resolving the euro crisis are likely to be sources of nervousness for the Irish authorities.
"In addition, the chronic weakness in domestic demand needs to be arrested, both to ease the pressure on the public finances and the banks, and to ensure that the political support for the demanding reform programme is maintained," the report concludes.
The yield on Irish nine-year bonds fell to a new low on Friday, dropping to 4.75pc, the lowest since May 2010. It has fallen more than 25bps this week.