The Central Bank has forecast that the economy will grow by less than 3% next year, and even this will depend on a recovery in the international economy. The possibility of this happening is, the Bank says, 'predominantly on the downside.'
In its Winter Bulletin, published today, the bank cut its GNP growth forecast from the 4.25% in its last bulletin to under 3%.
The bank also said it had has written to banks and building societies to express its concern over the increase in mortgage lending in the second half of this year.
It said that easy credit conditions might be one of the factors influencing what it described as a 'rapid acceleration in residential property prices' which is coming on the back of price levels that are already high by international standards.
The report said that in the year to October residential property prices had risen by over 10%.
The Central Bank also warned that the competitiveness of labour intensive parts of the economy would continue to be hit if the euro appreciated further. A stronger euro could also hit the prospects of a recovery in export growth. The euro has appreciated significantly against the dollar over the past month or so.
