The Central Bank has cut its forecast for economic growth for next year from 4% to 3.25% in its latest economic commentary.
It says it is reducing its forecast as a result of weaker demand in the Irish economy.
The Central Bank says house building and property prices are moving towards more sustainable levels.
The bank also says it would be desirable to aim for a surplus in the Government finances next year.
It says that would ensure that in the event of lower economic growth the public finances could accommodate this without the Government having to resort to 'corrective action'.
The bank says it is still difficult to assess the full impact of the recent financial turbulence on Ireland's trading partners.
However, it says it expects the US to be worst affected.
It says the Irish economy continues to perform solidly in the current uncertain international environment following a period of strong growth.
It says next year Ireland will see inflation ease but a limited rise in unemployment.
