The Government has cut its forecast for economic growth in 2002 from 3.5 per cent to 3 per cent as concerns linger about the strength of the global recovery.
In its latest Economic Review and Outlook report published this afternoon, the Department of Finance said that inflation should moderate in the second half of the year, with a CPI rate of around 4.5 per cent for the year as a whole - slightly above the budget estimate.
In a statement issued with the Review, the Department of Finance said the slowdown reflected a number of factors, including a more subdued demand growth in our major trading partners.
"Following a sustained period of very strong growth since 1994," the statement reads, "the Irish economy slowed markedly last year, particularly from around mid-year.
"The slowdown reflected a number of factors, including more subdued demand growth in our major trading partners, difficulties in the information and communications technology sector, and the restrictions aimed at combating the threat of foot-and-mouth disease.
"However, employment continued to grow, bringing unemployment down further. Inflation, while easing, remained significantly above the euro-area average."
The outlook for the rest of the year is for a further slowdown coupled with a weakening of the public finances which, nevertheless, will still produce a surplus at the end of the year, the Review says.
"On the basis that the international economic recovery gains momentum and that competitiveness is maintained, a pick-up in domestic economic activity is envisaged, albeit at a slower pace than foreseen at Budget time - with GDP expanding by 3 per cent rather than the 3.5 per cent then forecast," the review adds.
Inflation in the second half of the year is expected to be somewhat lower than in the first half, with a CPI rate of around 4.5 per cent for the year as a whole - slightly above the Budget estimate.
Commenting on the Review, the Minister for Finance, Mr McCreevy said that that while the short-term outlook for the economy is subject to ongoing uncertainty, Ireland retains the potential for comparatively strong growth in the medium term, provided international growth is maintained and we maintain our competitiveness on world and domestic markets.