The Department of Finance is expected to reduce its forecasts for economic growth and inflation this year, when it publishes its annual review and outlook this afternoon.
The forecasts will be an indicator of the backdrop to December's Budget, with the Department already having said that weak growth is hitting tax revenues this year.
The Department's review and outlook - which is published each August - will be its first revision to its economic forecasts since the 2003 budget. It is expected to reflect the significant softening in economic conditions in the meantime by reducing forecasts for consumption and investment.
The Department is also expected to cut its inflation forecast for this year from 4.8 per cent to well below 4 per cent.
Last December's budget foresaw that some upturn in the international economy would benefit Ireland in the second half of this year. However, with the global recovery slow to appear, the Department is expected to reduce its Budget forecast of 5 per cent export growth this year and also to trim its prediction that consumer spending will pick up by 2.9 per cent.
Downward revisions in these areas would be in line with what most other forecasters have done, as it became clear that the international economy was slow to show clear signs of recovery.
The extent to which the Department revises down its forecast for overall economic growth, as measured by the rise in gross national product (GNP), will depend in part on technical assumptions in areas such as the level of multinational profit repatriations.
However, the Department's current forecast of GNP growth of 2.2 per cent this year may be revised down to below 2 per cent.
At the presentation of the mid-year Exchequer figures last month, the Department said that lower growth this year would contribute to a tax shortfall of some €500 million.
The review and outlook forecasts will give an indication of the extent to which the Department believes that the economy will recover in the latter months of this year.
However, it is not expected to give any indication about its view on 2004 growth prospects, which will be the crucial factor in assessing the outlook for tax revenues next year, which will lie behind the budgetary arithmetic.
Last December, the Department predicted that GNP growth next year would be 2.9 per cent, but any revision to this forecast may not be updated until the 2004 Budget, which will be presented on December 3rd.
One area of interest in today's forecasts will be the Department's view on the jobs market, commented Mr Austin Hughes, chief economist at IIB Bank.
The current official forecasts see the unemployment rate rising to 5.3 per cent this year and stabilising at this level next year. The labour market is a key factor for the Exchequer finances, as it affects income tax revenues.
