There is no room for complacency on house prices or growth in mortgage borrowing, the governor of the Central Bank, Mr John Hurley, has warned.

The governor said he still saw a soft landing in the housing market as "the most likely scenario", but he pointed to developments in property prices and "the rapid increase" in mortgage credit as posing some "concerns".

He was addressing the Cork Chamber of Commerce on the economic performance of the Republic and Europe.

He told the audience that the Republic, as a very open economy, was "vulnerable" to adverse developments in the global economy.

The biggest such risk, according to Mr Hurley, was a "disorderly unwinding" of global imbalances, such as the twin deficits in the US.

"If this were to occur, we could experience a rapid decline in the US dollar and a sharp euro appreciation, which would impinge on our competitiveness."

He identified high energy prices and geopolitical uncertainties as the other main external risks facing the Irish economy.

Mr Hurley said the Republic must concentrate on maintaining its international competitiveness so that economic growth could be sustainable over the longer term.

The Irish services sector had "a long way to go" in raising competition levels.

"There still are significant barriers to entry in many professional services in particular, and, as a consequence, prices here are very high by international standards."

He also highlighted the "special competition and regulatory arrangements" that were required by the utilities sectors.

The governor said the Republic had done "generally well" in the macroeconomic area, both in terms of inflation and fiscal policy, over the past decade.

He suggested, however, that, after a period of relatively low inflation, "we may have forgotten its importance for economic progress".

He said it was important that the State's already-high price levels were not exacerbated.

"It is also important that we are realistic in our expectations, whether in regard to incomes or what we expect to be delivered by way of public services."