The Central Bank yesterday played its part in trying to shore up confidence in the Republic's economy. "Tigers can't get foot-and mouth disease," assistant director general Dr Michael Casey quipped in explaining the Bank's optimistic view of the world. There was no need to get hysterical about a slowdown in economic growth from the heady levels of 9.75 per cent to between 6.5 and 7.5 per cent, he counselled. Every economy was faced with external shocks from time to time and they just get through it.

He stressed that even if growth rates dropped to around 6 per cent, the Republic would still be the envy of Europe.

Inflation remains a concern, with the Bank identifying wage inflation as a particular worry at the moment. Pressures on infrastructure and in the housing market will continue to fuel price increases. The Central Bank agrees with estimates that house prices in the Republic will increase by a further 10 per cent this year as the supply of new housing shows signs of slowing.

It is content, however, that banks have been responsible in their lending, particularly in mortgages, and is unconcerned about any significant rise in potential bad debts.

The Bank's latest forecasts fully incorporate the expected slowdown in the US economy but its estimate of the consequences of foot-and-mouth disease is still very tentative and may be revised.

The Central Bank subscribes to the official view in the US that the slowdown will be a temporary phenomenon and that a recovery will be staged later this year. If the slowdown proves to be a more lengthy process, the Bank will be forced to "crunch" its numbers again.

It does concede the possibility that the slowdown could be protracted. This would manifest itself in the economy in a downturn in investment and activity in the high-technology manufacturing industry that has spurred economic growth here.

In this scenario, the impact would be much wider and would affect other sectors built around this industry. The most immediate impact would be felt in the services sector. The Bank suggests that for every job created in the information technology sector there is one created in the services industry. The construction industry would also suffer in any longer-term slowdown, with the postponement of projects such as that already announced by Intel.

The extent to which foot-and-mouth disease can be contained will also determine the extent to which agricultural exports will be hit. Continuing restrictions, which have led to widespread cancellation of events affecting the tourist industry, may be even more significant if sustained for a lengthy period.

Overall, Dr Casey is confident that the Republic's economy is facing a series of setbacks rather than a sharp reversal of fortune. Maintaining consumer confidence is crucial to ensuring this outcome and will continue to be the message from the Central Bank.