Mr McCreevy said he expects GDP growth next year to slow significantly to 3.9 per cent. But in the medium term, the economy should return to its potential growth rate of around five per cent.
In his fifth Budget speech today, Mr McCreevy admitted his forecasts represented "a best estimate" and are subject to change in view of the uncertain international outlook.
Unemployment could average 4.75 per cent next year but the upward trend should reverse as external conditions improve, Mr McCreevy said.
Referring to inflation, Mr McCreevy said after temporary rise early next year, inflation is projected to ease, helped by lower imported inflation, before falling to 2.25 per cent by 2004.
"There is no point in wishful dreaming. The reality is that the future is particularly uncertain at present," he told the Dáil.
"Nevertheless, our economy is basically in good shape and that message should go out clearly," he said.
"As long as we take account of the reality of the current situation and position ourselves to take full advantage of the recovery when it comes, we will have done well," he added.