Business lobby group Ibec said today Exchequer revenues for 2007 will be €1 billion below expectations and that growth will remain sluggish in 2008.
In its quarterly review of the economy, Ibec chief economist David Croughan said the economy had performed well with GDP growth of 6.7 per cent for the first half of the year and solid growth in manufacturing and exports.
"Employment, too, has grown by a healthy annual 3.9 per cent in the first half of the year," he said. However, he said the rebalancing of the construction sector would require "careful management".
He predicted that Irish economic growth would slow down in the second half of the year with clear indicators pointing to a sharp slowdown in the second half of the year.
"GDP growth, we think, will slow to just below 3.5 per cent in 2008, though we should remind ourselves that this would still be one of the highest growth rates in the euro area," Mr Croughan said.
He added that the "focus of government policy must be on the completion of the infrastructure programme and support for enterprise in achieving a higher productivity performance.
"Additional essential capital infrastructure projects should be ready to implement if spare capacity in the construction sector does emerge," he said.