Ireland's economy is poised to benefit from the global upturn

The country's public deficit would be smaller than expected thanks to better tax revenues than expected in 2004, the government said.

The projected borrowing requirement was revised to 1.8bn euros ($2.2bn; �1.2bn) from a budget forecast of 2.8bn euros.

And economic expansion was revised to 4.7%, from a previous forecast of 3.3%.

Gross domestic product grew by 3.7% in 2003.

Higher tax returns

In his 2004 Economic Review and Outlook, Finance Minister Charlie McCreevy forecast inflation at an average of 2.2% after 3.5% last year and 4.6% the year before.

Mr McCreevy put the expected deficit at 0.4% of GDP, compared to the previous estimate of 1.1%.

"This improvement in public finances is mainly due to higher tax returns for the first seven months of 2004 than were projected at budget time," he said.

Additional tax revenues for 2004 could be up to 600m euros.

Ireland's economy boomed in the 1990s on the back of a huge expansion of inward investment, with many foreign multinationals using Ireland as a production platform to sell into the European Union.

A few years ago, observers feared that the boom would get out of control, leading to high inflation and a big government deficit.

Ireland's membership of the eurozone was also questioned on the grounds that it would not be able to raise interest rates to cool the boom.

But from 2002 the economy slowed sharply of its own accord.

Competitiveness 'a priority'

In Thursday's statement, Mr McCreevy said the Irish economy had been "highly resilient" in face of a global downturn.

But he cautioned that regaining competitiveness was a key priority in safeguarding Ireland's economic success.

Figures showed that employment grew 1.9% in 2003, with 33,600 new jobs created and unemployment at 4.6%.