IRELAND has gone from being the "basket case of Europe to the poster child", says a top finance company.
And Friends First says consumers will increase their spending once the Government signals an end to austerity.
The firm's chief economist, Jim Power, said that the greatest stimulus the Government could provide the economy is an indication of when it will stop implementing austerity measures.
According to Mr Power, such a move would give a massive boost to both consumer confidence and business confidence and would result in an increase in spending.
"The prospect of a further €5.1bn being extracted from the economy over the next two budgets is quite ominous for consumers – it is not at all clear where the axe can, or indeed will, fall,'' he said. "Until external demand improves, it is unlikely that Irish consumers will be tempted to resume spending," he added.
Mr Power's latest Economic Outlook does give grounds for optimism and points out that the country's international reputation has strengthened.
"We have gone from being the basket case of Europe to the poster child," Mr Power said.
His report predicts GDP growth of 1.5pc for 2013, followed by growth of 2.5pc in 2014.
It also predicts that unemployment will ease from a level of 14.7pc last year to 14pc this year, and fall to as low as 13.7pc in 2014.