Almost seven of every 10 workers in the economy are now employed in the services sector, according to a new Forfás study.
The detailed review of the changing nature of manufacturing and services in Ireland - published today - found that employment in services has increased by 21 per cent since 2000, compared to an average of 6 per cent across G7 countries.
The rapid expansion of the sector means that Ireland is now ranked as the 13th largest service exporter in the world.
The report reveals that employment in manufacturing has declined by 13 per cent or 31,000 jobs since its peak in 2000.
But over the same period output in the sector has increased by 28 per cent indicating an increase in productivity.
The sector spends almost €25 billion a year on wages and with Irish suppliers, and it accounts for almost 30 per cent of corporation tax.
Sectors such as medical devices and chemicals have seen a significant growth in employment since 1995, rising 79 per cent and 27 per cent respectively.
But employment in textiles and electrical machinery have fallen by 74 per cent and 28 per cent respectively.
"Because of the high proportion of US and UK owned firms, the manufacturing sector is quite exposed to currency shocks," the report said.
Forfás chief executive Martin Cronin said: "This data shows that Ireland's economy is changing in line with international trends.
"Despite concerns about the sector, manufacturing continues to contribute significantly to our economic success."
"Ireland is punching well above its weight in terms of share of manufactured exports."
Despite impressive export growth in the services sector, the report reveals that Ireland remains a net importer of services with a deficit of €9.9 billion in 2005, compared to a trade surplus of €30 billion in merchandise.
Computer services are the most significant export service sector accounting for 35 per cent.
"There is also a strong export base of insurance and finance services, which account for a further 25 per cent of total services exports," it said.
Speaking at the Minister for Enterprise, Trade and Employment, Micheál Martin said: "This report shows that the trends in the Irish economy closely mirror those in other developed countries."
Mr Martin said: "It underlines the need for a healthy manufacturing sector, particularly as it is an important driver of productivity and innovation."
"It shows that Ireland has been successful in the evolution of its enterprise base. However, our favourable enterprise environment must continue to evolve to support the changing nature of industry in Ireland.
"A high level manufacturing group will be established to review the challenges facing the manufacturing sector and to identify further measures to meet those challenges," he said.
