Policymakers should recognise there are serious challenges and threats ahead which require careful economic management, according to Bank of Ireland Treasury's chief economist, Mr Jim Power.
Among the threats are any serious outbreak of inflation in house prices or services.
Such a rise would put serious pressure on wages, Mr Power has warned in a medium-term view of the economy.
It would create particular difficulties in the public sector where continued strong growth in the wage bill would divert resources from necessary structural investment and add to the permanent cost base of the economy, and it would place a serious strain on public finances if economic growth slowed sharply.
In an EMU context, any serious increase in relative wage costs would be a risk because the competitiveness of Irish exports would be undermined within the fixed exchange rate regime.
Within the same context another risk would arise if Britain failed to join EMU and there was a consequent sharp increase in the volatility of sterling against the euro.
Forecasting that growth in gross domestic product would slow to 5 per cent (from just over 9 per cent this year) in 2003, Mr Power said this "soft landing" for the economy was desirable because growth could not continue at current levels without creating "serious imbalances".
The authorities must manage the economic boom to ensure that this soft landing of gradually slowing growth was achieved, he said.
Average annual GDP growth of 6.6 per cent per annum until 2003 would result in significant wealth-creation and would ensure that GDP per capita was well above the EU average.
An employment shock could arise from any heavy dis-investment by US multinationals following either a crash in the US equity market or a sharp rise in the Irish cost base.
An interest rate rise of about 3 per cent, while difficult to envisage in an EMU context, would create considerable difficulties for borrowers.