The European Commission has advised Ireland to maintain a balanced budget and to put measures in place to curb public spending.
The EC report assessed the effect of the downturn in the housing market here and highlighted concerns about the effects of an ageing population on public expenditure. It said Ireland would also be affected by the expected slowdown in the United States and United Kingdom - two significant trading partners.
The report said Ireland is facing challenges in its transition to a period of lower but more sustainable economic growth but must try and avoid a deterioration of the budget.
It added that although the economy is slowing down, growth prospects remain good and well above the euro area and EU averages.
The Government was also advised to also consider further pension reforms to curb the expected increase in age-related expenditure - such as pensions and health care.
Fine Gael finance spokesman Richard Bruton said the report on the Irish economy is further proof that Minister for Finance Brian Cowen "blew the boom" and has left Ireland "unable to deal with the worsening economic crisis".
"The European Commission has fired a clear warning shot about the slowdown in the Irish economy. In no uncertain terms it pinpoints the collapse in the public finances, the housing slowdown, the busted export markets and the pension crisis," he said.
"None of this is in any way surprising and can all be laid squarely at Brian Cowen's feet."