The Paris-based Organisation of Economic Cooperation and Development in its latest economic outlook published today said it believes the Irish economy is stabilizing.
However the international think-tank has warned that the country's labour market remains a source of concern.
"After one of the most severe recessions in the OECD area the Irish economy is now stabilizing
but the recession left significant scars in the labour market that will take time to heal," the report said.
"The latest OECD projections suggest that in Ireland the expected recovery is unlikely to be sufficiently vigorous to reabsorb rapidly the current high levels of unemployment," it warned.
"Indeed, there is a significant risk that the temporary hike in unemployment becomes structural and discouraged job losers grow permanently disconnected from the labour market."
The report warned that Ireland needs to create one job for every five that exist today to reach pre-crisis levels.
That amounts to about 320,000 positions.
It also warns governments planning austerity drives not to risk excluding people from the jobs market for too long.
The report goes on to advise governments to target their jobs policies on the most disadvantaged groups - and those with few or no skills.
It says that unemployment is particularly acute in economies where a "boom-bust" pattern in the housing market has played a role - singling out Ireland, Spain and the US.