The Irish economy, which is estimated to have declined in GDP growth to 4.5 per cent in 2002, is likely to slow further to a 3.5 per cent growth rate this year.
According to Hibernian Investment Managers' (HIM) FOCUS 2003report, inflation will remain an Irish problem, affecting competitiveness and bringing continued slowdown in the economy.
The slowdown, the report says, is directly related to changes made in the 2003 budget, the strength of the euro and the continued wage-price spiral.
Internationally, global growth will remain stable; inflation will stay low; interest rates will rise only modestly, if at all; and equities will outperform bonds in 2003.
Overall, HIM anticipates 2.5 per cent GDP growth rate in the United States for 2003, while corporate investment will take-up the running from consumer spending later in the year.
The euro zone is also likely to be hit this year, with the report offering a best-case scenario of only 1.6 per cent GDP growth for the euro zone in 2003.
Germany is identified as the main problem in Europe, restraining euro zone growth for the foreseeable future.
A major reason for the lack of optimism, the report adds, is the relative inactivity of the European Central Bank compared to the US Federal Reserve in cutting interest rates to stimulate growth.