Ireland has received EU praise for cutting Government and bank debts, with the European Commission declaring the country free of economic “imbalances”.
But it warned that high house prices remain a “challenge” while not posing a risk to the overall economy.
It also said Ireland was falling behind other EU countries on recycling and waste water treatment, and said renewable energy projects are being hampered by planning delays.
And it pointed out that recent measures to counter rising energy prices – such as the €200 energy credit and cut in excise duties – are “not targeted” at those most in need.
Announcing its annual spring policy recommendations on Monday, the European Commission said it was suspending its debt and deficit rules for an extra year, until the 2024 budget round, as a result of Russia's war in Ukraine.
The bloc cut its 2022 growth forecast by more than a point last week due to the effects of the war, although Ireland escaped a significant downgrade.
Ireland has been part of the EU’s economic imbalances process since it was created in 2012.
“In Ireland, debt ratios have declined significantly over the years and continue to display strong downward dynamics,” the European Commission said in a communication on Monday.
“Important progress has been made in reducing government and private indebtedness as well as net external liabilities, both before and since the pandemic.
“Both private and government indebtedness are expected to continue falling, with the external position strengthening further.”
The Commission said Ireland’s debt reduction was still “significant, albeit smaller” when adjusted for the contribution of multinational companies to the economy.
Ireland’s debt as a percentage of gross domestic product (GDP) - which includes multinational transactions - is estimated at 56pc last year, the Commission said, below the EU’s 60pc limit.
Debt to GDP is expected to fall to 50.3pc in 2022 and 45.5pc in 2023, the Commission estimates.
The Government measures debt as a percentage of adjusted gross national income (GNI*), which strips out some of the effects of aircraft leasing and patents on the Irish economy.
The Department of Finance expects gross debt to measure 105.6pc of GNI* this year, falling to 96.5pc in 2022 and 89.9pc in 2023.
The Commission noted Irish banks are reducing their non-performing loans.
But it pointed to rising house prices as a potential risk for the economy.
“High house price growth continues to be a challenge for housing affordability, but risks to macroeconomic stability appear contained so far,” the Commission said.
Ten EU countries are “experiencing imbalances” this year - including France, Germany, The Netherlands and Sweden - with problems in Cyprus, Greece and Italy labelled “excessive”.
Last week the European Commission revised down 2022 GDP growth by 1.3 percentage points to 2.7pc, while Ireland’s economy is expected to expand by 5.4pc, a very slight downward revision on its winter estimates.
"Russia’s invasion of Ukraine has undoubtedly put Europe into extraordinary economic uncertainty,” said Commission vice-president Valdis Dombrovskis.
"This has resulted in significantly higher prices for energy, raw materials, commodities and food, and is hurting consumers and businesses.”
EU economy commissioner Paolo Gentiloni said the bloc was allowing for easier fiscal rules for another year because governments “must also have the flexibility to adapt their policies to unpredictable developments”.