The Irish economy expanded rapidly in recent years, driven by domestic demand, but activity is now easing. In particular, the housing market has cooled: house prices are falling and fewer houses are being built. Despite the slowdown, growth could remain above the euro area average, although downside risks prevail in the short run. Economic fundamentals remain strong, however, with a skilled workforce, a flexible labour market, moderate taxation, a business-friendly regulatory environment and a still sound fiscal position. Following many years of a booming economy, slowing economic activity will test the resilience of the drivers of economic growth, and the fiscal, financial and macroeconomic frameworks. At the same time, the physical infrastructure and public services need to be improved further. Ireland should also ensure that social progress is sustainable in the long term, particularly as the population ages.