The Central Bank has revised its growth predictions for the economy slightly downward for this year.
Nonetheless, it has maintained the Irish situation has proven "fairly resilient" in the face of the weaker international economy.
However, the bank also warned the predicted recovery in the euro area economy would not now begin to pick up steam until early next year.
In its annual report for 2002, which it published this afternoon, the bank forecasts a GNP growth rate of about 1.5 per cent (GDP 2.75 per cent) for 2003. This is a downward move of one quarter of a point from the prediction in the Central Bank's Spring Bulletin.
The Governor of the Central Bank, Mr John Hurley, said although the international climate was difficult, the Irish economy had been performing "fairly well".
"We are not doing too badly, considering the international conditions", he said. "There is evidence that the Irish economy has proved to be resilient in the face of the weaker international economy".
Mr Hurley said the expected pick-up in economic growth internationally has failed to materialise.
"Growth in the US, though weak, is still better than that of the euro area where economic recovery has been disappointing. It would now appear that the euro area recovery will not begin to gather pace until early 2004", he said.
Against the background of the international situation, it was not surprising that economic growth in Ireland had decelerated sharply over the past few years, Mr Hurley said.
"On balance, the economy has been performing as well as can be expected in this difficult global environment and after a period of domestic overheating. While growth was modest last year, nonetheless the economy has retained the substantial gains in living standards and employment achieved since 1994," the Governor added.
Mr Hurley also highlighted threats to competitiveness due to domestic inflation and the rapidly appreciating euro.
On fiscal policy, he said the commitment to limit the increase in public spending to 7 per cent and to hold the General Government Deficit to 0.7 per cent of GDP was to be welcomed.
Adherence to this target should help to restrain inflation and help competitiveness, he said.
The Governor again expressed concern at the "excessively high" level of mortgage credit growth, now running at 24 per cent. He said the Central Bank had written to the credit institutions on the matter and had followed up with on-site inspections.
In its financial results for 2002, the Central Bank recorded a profit of €829 million, an increase of €266 million over 2001. Some €240 million of the increase arose from the write-off of unredeemed Irish pound banknotes following the euro conversion.