The Minister for Finance Brian Cowen says it is now clear that the financial position will be very tight for the Budget.

He was speaking after revising downwards his economic outlook for next year, predicting growth of 3.25%, down from the 4.6% expected at the last Budget.

As a result the Government is expected to receive €2.2 billion less in taxes next year than previously expected. Brian Cowen also confirmed that an Exchequer deficit of up to €1 billion was now expected this year, as opposed to a deficit of €546m forecast at Budget time.

The Minister has also published pre-budget estimates for public services next year, showing the cost of providing existing services rising by 4.8% to €51 billion.

These estimates do not include any increases or decreases in public spending that may be decided on by the Government - they will be announced on Budget day.

The 4% rise in spending accounts for pay increases due to staff, the expansion of programmes due to demographic changes, and the full-year impact of the recruitment during 2007 of, for example, extra teachers and Gardaí.

'The lower growth going forward will have implications for us all. But we mustn't lose sight of the fact that this performance is nevertheless impressive by international standards,' Mr Cowen said.

The economic projections include a prediction that employment will grow by just 1.5% next year, which is lower than in recent years. Unemployment is forecast to rise from 4.5% this year to 5.5% next year. This is expected to lead to an increase of 10,000 people on the Live Register.

In construction, housing completions are predicted to drop from 80,000 last year to 70,000 this year, and to below 60,000 next year. This decline one of the reasons why economic growth will slow down.