Irish economists have revised their 2008 growth predictions as the downturn in house building activity continues to act as a "drag" on the economy.

The AIB said in its Irish Economy Bulletin, published yesterday, that the construction sector will be the main drag on the economy again in 2008, with residential investment forecast to fall by 36% as a result of a decline in housing completions to 50,000 from 78,000 in 2007.

John Beggs, Chief Economist, AIB said: "With the downward adjustment in this sector continuing into next year, we have revised down our forecasts for housing completions in 2009 to 40,000.

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"When combined with the impact of associated transfer costs, the decline in housing will depress GDP growth by almost 4% in 2008 and close to 1.5% in 2009."

Mr Beggs has revised growth predictions to 2.2% this year, against a previous forecast of 2.5%.

Meanwhile, Davy Stockbrokers said yesterday that housing starts have fallen 70% year-on-year in March - the biggest annual decline on record.

Furthermore Davy Economist, Rossa White said housing starts have yet to reach bottom.

"We estimate that total housing starts (including one-off housing) were running at an annualised rate of 24,500, seasonally adjusted, in March," he said. "That compares with 27,000 in February, 32,000 in January and 40,000 in December."

The National Irish Bank also predicted a sharp slowdown in economic growth this year. Also citing the weakness in the construction sector as impacting on the rest of the economy - the bank said it expects GDP growth to slow to 2.9%

(VB/JM)