The Central Bank has raised its economic growth forecasts for this year slightly, but has warned that uncertainty over oil prices could affect its predictions for next year.
In its Autumn Bulletin, the bank says gross national product will expand by 4.5% this year, compared with 4.25% in its summer report. It sees gross domestic product - which includes profits from foreign multinationals - growing by 5%.
The bank has left its GNP forecast for next year at 5%, but says this is subject to 'significant risks' because of continuing uncertainty about the price of oil and other important raw materials.
It also warns that the large US deficits could leave the dollar facing a sharp fall, which would lead to problems for Irish exporters. The bank says weak consumer demand in the euro area is another risk.
On the domestic economy, the report says capital investment was strong in the first half of this year, but consumer demand remained weak.
The Central Bank says the forthcoming budget should be 'neutral' - neither adding to nor taking from overall demand in the economy. It says the aim should be to secure inflation at its current low level. The report has left its inflation forecast for this year at 2.25% but has raised the estimate for next year slightly to 3%.
The bank also said 'a significant undershoot' in the Exchequer borrowing requirement of at least €2 billion now seemed likely for 2004. In last year's budget the Government predicted a deficit of €2.8 billion.
