Economic think-tank the ESRI is forecasting that Ireland will be close to full employment by the end of next year.
In a new report, it predicts GDP will grow 5% this year and 4% in 2018.
It says consumer spending is one of the main reasons for strong economic growth, but it is advising the Government to bring in a "neutral" budget.
Report author Professor Kieran McQuinn says increasing spending too much could cause problems.
He said: "Whilst there are key infrastructural deficits within the economy that need to be addressed, we have done a lot of analysis in the present commentary to highlight that, if the Government spends a lot of money in terms of capital expenditure it could increase the possibility of the economy overheating."