The Irish Central Bank says Ireland should exit recession in the second half of 2010.
However, the bank said the recovery would be export-led and that Irish workers would see their pay packets shrink or stay stagnant to help pay for the recovery.
It said Ireland needed to become more competitive and said fees charged by the so-called professionals (doctors, dentists, lawyers, etc) were far too high.
It also warned that health care, health insurance, utilities and public transport were all far too expensive.
"Lowering the costs of doing business in Ireland represents a necessary adjustment and would leave the economy better placed to benefit from a global economic upturn," it said.
The bank expects the jobless rate to top out at 13.5 percent instead of the former forecast of 14 percent.
Must-see off the beaten track spots around Ireland (PHOTOS)