Ireland's economic growth is set to halve this year to about 2.5 per cent, below the government's projection last week of three per cent, Prime Minister Bertie Ahern said.

"This year the economy will grow at approximately 2.5 per cent, with even the most conservative commentators predicting an upward curve to four per cent growth in the years afterwards," Mr Ahern said.

Longer term growth prospects remained strong however, despite the volatility on international financial markets and the expected slowdown in the Irish housing sector, Mr Ahern said.

"Although these are slower rates than we have been accustomed to in recent years, they show the steady and sustainable growth which remains a solid bedrock for the Irish economy and Irish jobs," he said.

The government would not try to boost growth by loosening budgetary discipline, he added.

Last week Finance Minister Brian Cowen forecast economic growth of three per cent, down from around five per cent expected for 2007 and 5.7 per cent recorded in 2006.

Mr Cowen warned, however, that unemployment was likely to rise this year and any US recession would have some adverse effect on the Irish economy.

An end to Ireland's decade-old property boom, when house prices quadrupled, is expected to lead to a sharp drop in house building this year, which in turn is set to dampen the broader economy.