A sharp rise in the balance of payments deficit in the first quarter of the year confirms growth is easing, economists said yesterday.

The Central Statistics Office (CSO) said the current account deficit rose to £699 million (€887 million) in the first three months of the year from £54 million in 2000.

An economist at AIB Group Treasury, Mr Oliver Mangan, said that rise was higher than expected.

He added: "These sets of figures show that growth of imports is beginning to outstrip the growth of exports. It's another sign that the economy is beginning to slow."

AIB had forecast GDP growth of 7 per cent for 2001, down from 11.5 per cent in 2000, Mr Mangan said. The bank forecast 6 per cent GNP growth, down from 10.4 per cent a year earlier. The chief economist at IIB Bank, Mr Austin Hughes, also forecast 6 per cent GNP growth this year.

The CSO said surpluses of £6.06 billion for merchandise and £102 million in current transfers were exceeded by deficits of £3.33 billion on services and £3.51 billion on income.

Mr Hughes said growth of imports reflected the buoyancy of the domestic economy across the board.

Imports of sales commissions and management charges, classified as business services, rose to £3.24 billion in the first quarter from £1.68 billion in the period in 2000. Overall, services imports rose to £6.99 million from £4.64 million in period and service exports rose to £3.67 million from £2.72 million.

Mr Mangan had expected export and import growth to decelerate through the year and expressed surprise at the high value of service imports. The rise in exports was expected because fear of the Y2K computer bug prompted manufacturers to frontload sales ahead of January 2000, distorting first quarter figures last year.

Mr Hughes said: "The impact of stronger export growth on the economy is not as dramatic as the monthly trade statistics imply because the numbers show a dramatic rise in service imports.

"In terms of the broad impact, the first quarter figures indicate there's going to be a substantial full-year deficit of the order of 2 per cent of GNP against 0.5 per cent of GNP last year."

The figures showed tentative signs of a reduction in foreign direct investment.

The CSO said such investment rose to £4.87 billion in the first quarter from £2.27 billion in the same period last year, but Mr Hughes said it was more meaningful to record a decline in investment from £6.45 billion in the final quarter of 2000. "This is a tentative indication but it bears close watching."

Also yesterday, the CSO revised annual and quarterly balance of payments data published last April.

The office said this reflected late returns and more up to date figures generally. It lowered the 2000 current account deficit to £535 million from £446 million and lowered the 1999 current account surplus to £262 million from £446 million.