The Irish economy is performing well but inflation and soaring house prices remain a worry, according to the Central Bank's annual report.
Central Governor, Mr John Hurley, said that in the context of an improving international economic climate, the Irish economy performed reasonably well in 2003.
"The outlook for the economy is good," he said, citing strong employment growth which has led to a jobless figure of 4.4 per cent.
However, Mr Hurley pointed out that inflation risks remain. "The economy is performing relatively well at present, but we have to stay competitive to ensure that Ireland remains an attractive location for foreign direct investment," he said.
The Governor also referred to mortgage credit growth. "We are still concerned about the continuing strong increases in house prices, with current rates rising at 12 - 13 per cent: there is a risk of a significant correction if this continues."
The Central Bank is now forecasting GNP growth for 2004 of about 4.25 per cent and GDP of 4.75 per cent, an upgrade on the earlier forecast of 3.25 per cent GNP and 3.75 per cent GDP published in the Spring Bulletin.
Turning to the euro area, Mr Hurley said that the pick-up in economic growth internationally has benefited Ireland as well as other countries.
"It would appear that strong external demand is creating the conditions for a strengthening of the recovery in the euro area," he said.
However, awareness of inflation risks must remain high. "The avoidance of second round effects of recent oil price rises is vital to this recovery," Mr Hurley said.
He added that the current benign outlook is "in line with price stability over the medium-term".
The annual report - which includes the Bank's financial results for 2003 - shows it paid surplus income of €321.7 million to the Exchequer in respect of 2003.
The proceeds of the 2003 coin issue of €78 million have also been paid to the Exchequer.