Tumbling oil prices drove Ireland’s inflation rate to -0.3 per cent last month, its lowest level in four-and-a-half years.

This is only the second time since 2010 that the Consumer Price Index (CPI) has dipped into negative territory - it fell to -0.1 per cent in February last year.

The figures will renew fears that Ireland’s recovery may be threatened by a deflationary spiral, which would make it more difficult to service debt and encourage consumers to defer spending.

However, several experts said the negative price growth was being driven by lower energy prices and reduced mortgage interest costs, both of which are positives for the consumer, and reflect global conditions rather than weaknesses in the domestic economy.

The latest figures indicate the cost of an average basket of goods and services in December was 0.3 per cent lower than a year earlier.

On an annual basis, transport costs fell by 3.8 per cent due to lower petrol and diesel prices and a reduction in car prices.

Prices for household furnishings and routine house maintenance also fell by 3.1 per cent, while the cost of food and non-alcoholic drinks dropped by 2.6 per cent.

Conversely, the cost of education rose by 5 per cent, mainly on the back of recent increases in college fees.

Alcohol and cigarette prices were also stronger, rising 3 per cent reflecting increases in excise duty announced in the last budget.

Euro zone inflation fell to -0.2 per cent in December, figures last week showed, well below Frankfurt’s official target of 2 per cent.

The continent’s anaemic level of price growth has raised the prospect of further ECB intervention, which is expected to be in the form of a new bond-buying programme.

Merrion economist Alan McQuaid said: “With prices falling into negative territory, the danger is that deflation becomes entrenched in the system.”

"Ireland is not in our view on the brink of dangerous deflation. It's in a lot better shape than the euro zone as a whole."

“Deflation is less likely to take hold in a strong economy, and the Irish economy is far healthier at this juncture than the rest of euro land. All in all, we see lower oil prices as a boost to disposable income and positive for Irish consumers,” he added.

Davy economist Conall Mac Coille echoed the point, saying it was difficult to be too concerned by negative inflation driven by falling oil prices.

“Not only is GDP expanding - but it is translating into improvements in the labour market, tax revenue growth and recovering asset prices.”

Nonetheless, he said some of the weakness in Irish prices does reflect muted wage growth, which is itself constraining opportunities for new bank lending as debt from the bubble years is slowly paid down.

However, the Irish Small and Medium Enterprises Association (Isme) reacted to the latest figures by calling on the Government to compel energy companies to reduce prices based on the fall in oil prices.

It described the recent Eircom price increase as “excessive and opportunistic” , warning that rising utility costs and insurance are threatening competitiveness and reducing the appetite for job creation in the SME sector.

Patricia Callan of the Small Firms Association said: “Given that there was just a 0.2 per cent increase in the cost of living overall in 2014, there is no justification whatsoever for broad-sweeping pay claims this year.”

“However, small companies will continue to reward employees who demonstrate productivity improvements at individual firm level,” she added.