The Irish government yesterday slashed estimates for economic growth this year, blaming the failure of a global rebound to materialise.
The Department of Finance forecast growth of just 1.5 per cent this year, a sharp cut from its previous prediction of 3.5 per cent.
The Irish economy, which grew faster than any other EU member in the last decade, is slowing because of the rise in the euro's exchange rate and the stagnation in Continental Europe that has cut demand for its exports.
"Competitiveness constraints may further limit the prospect of an export-led recovery in the second half of this year," the department said. "The international economy remains weak."
The report added, however, that the rate of inflation was expected to continue to fall towards 3 per cent by the end of the year, and to average 3.6 per cent for the year as a whole.
Charlie McCreevy, the Finance Minister, noted "the more muted growth scenario", but welcomed the "significant reduction" in the rate of inflation. Ireland currently has the highest inflation in the EU at 3.8 per cent, almost double the 2.0 per cent for the euro area that is used by the European Central Bank to set interest rates.