The Irish economy should grow by 1.7 per cent this year, according to the European Commission, slightly below the 1.8 per cent growth forecast three months ago.

However, the economic recovery should strengthen further next year, with GDP forecast to rise by 3 per cent in 2015.

In a relatively upbeat assessment of the Irish economy, the European Commission’s Spring Economic Forecast highlighted Ireland’s improving job market, noting that the number of long-term unemployed falling by 9.3 per cent in the year to March 2013 while youth unemployment decreasing by 8.8 per cent over the same period.

“The robust performance of the labour market remains the most visible sign of the Irish recovery, while the ongoing deleveraging in the private and the public sector continue to weigh on the speed of the recovery,” its analysis states.

However, the Commission warned that the economy could be subject to vulnerabilities. The continuing effect of legacy debts as well as impaired access to finance, continue to pose risks for SME’s, it said.

Noting that Ireland imports around 85 per cent of its energy, it warned that the country’s high dependence on imported energy, could leave it particularly susceptible to changes in prices arising from the Ukraine crisis.

While the contracting pharmaceutical sector had an adverse effect on trade last year, the Commission predicts a reduction in the pace of the sector’s decline in 2014 as the effect of patent expiries begins to fade, estimating that output growth in the sector will stabilise for 2015.

Unemployment will continue to fall over the next two years, with unemployment to fall to 11.4 per cent this year, and 10.2 per cent in 2015.

Overall, the European Commission lowered its growth estimate for next year, projecting GDP to rise by 1.7 per cent in 2015, compared with a previous forecast of 1.8 per cent.

Inflation is likely to remain at low levels for a “prolonged period”, the Commission said, forecasting an inflation rate of 0.8 per cent, and 1.2 per cent in 2015. With the ECB’s governing council due to meet for its monthly rate-setting meeting on Thursday in Brussels, the bank is facing calls to tackle the persistently low rates of inflation, which is now well below the ECB’s target of just below 2 per cent.