Taoiseach Bertie Ahern has told members of the Dáil that 2008 will be a year of tight management of the economy, particularly on expenditure.

The warning came as response to a question from Fine Gael leader Enda Kenny - in light of this mornings Exchequer Statement which revealed a budget deficit.

Mr Ahern said the figures show a substantial reduction in capital gains tax, representing a slowdown in construction and development.

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He said unemployment would increase this year, mainly in the construction sector and related service areas but the Government would do what it had to do as the year progressed to keep the country strong.

However, he said that economic forecasts were not all doom and gloom but reflected some difficulties for this year.

He referred to the positive outlook the European Commission had given the Irish economy.

The Taoiseach also added that he would not like to see a 'race to the bottom' on wages by the Construction Industry Federation.

(VB/JM)