The Government must maintain strict control of spending this year even if political challenges to austerity increase, the International Monetary Fund has warned.
The Washington-based lender said budget overruns, especially in health, highlight the need for strong control of spending.
And it warned any extra revenue or additional interest savings should be used to lower the deficit this year, despite electoral pressures.
“Ireland’s recovery has strengthened yet political challenges to adjustment appear to have increased,” the Fund said in its second post-bailout assessment report.
The IMF said growth was expected to ease this year from its projection of 4.75pc last year to 3.25pc in 2015, and to about 2.5pc thereafter.
It said that the risks to growth include the stagnating Eurozone, a slip in domestic demand, and a worsening of financial conditions.
“High public and private debts, non-performing loans, and unemployment, remain key vulnerabilities.
“Ireland also faces risks to international trade and financial conditions that imply significant uncertainty around medium-term growth prospects,” the IMF said.
The Washington-based fund also said that public debt remains high, although it was expected to have fallen to 111pc of GDP last year.
“On the upside, disposal of the state’s stake in the banks in coming years could significantly lower public debt; the state’s largest holding, in AIB, is currently valued at around 7pc of GDP,” the report said.
The IMF warned medium-term fiscal consolidation is at risk from spending pressures and a clear strategy should be set out.