Prospects for an immediate economic recovery diminished today as the Department of Finance revised predictions for GDP and GNP down to 1.5 per cent, from 3.5 and 2.2 per cent respectively in Budget 2003.
According to the Department of Finance's annual review, published at lunchtime, prospects of an immediate international recovery have diminished and the outlook for 2003 is for a further moderation in the rate of growth next year.
However, inflation is expected to continue falling towards 3 per cent by the end of the year and to average 3.6 per cent for the year as a whole.
The review cited the poor global economic environment as the main factor with the slowdown in the rate of economic growth, which began in 2001, becoming more pronounced in 2002. Although GDP increased by 6.9 per cent, the review says, GNP grew by only 0.1 per cent.
The significant difference between the two growth rates reflects the continued strength of the mainly foreign-owned, non-labour intensive sectors of the economy compared to the domestic sector.
Nevertheless, the labour market remained relatively resilient with a limited rise in the unemployment rate, although growth in private sector employment was absent.
At budget time last year, it was envisaged that conditions in Ireland would improve in the second half of this year in line with the anticipated recovery in the global economy.
Commenting on the outlook, the Minister for Finance, Mr Charlie McCreevy, insisted public finances were broadly on course.
He added that if the economy is to grow in accordance with its potential, it is essential that we regained our competitiveness.
"This will," he said "put us in a position to benefit from an improvement in the international economy when it occurs," Mr McCreevy said.
Fine Gael finance spokesman, Mr Richard Bruton, accused the minister of"managing the economy like a ham-fisted football pundit".
He added: "Minister McCreevy's inept handling of the economy is all overthis report, in spite of his attempts to cover up his bungling."
Labour Party finance spokeswoman Ms Joan Burton said of Mr McCreevy: "He isas short of ideas as the exchequer is of cash."
She went on: "It is clear that Mr McCreevy has simply no ideas for addressingthe decline in the Irish economy. Despite cutting the growth forecast for thisyear by a quarter, the Minister has no prescription to offer.
"He is blaming anyone but himself for the slowdown in the economy. Havingtaken credit for the good times, he is now intent on passing the buck forproblems which are of his own making."