The Government has carried over a saving of €126.1 million from 2007 to be spent on capital projects this year, according to the Revised Estimates published by the Department of Finance.

Gross expenditure will total €61.9 billion in 2008, just over €5 billion more than last year. This amounts to a 8.2 per cent year-on-year increase on current spending, 11.2 per cent on capital spending and 8.7 per cent overall.

Spending on the environment topped the increases with €3.2 billion, up almost 11.7 per cent, followed by social and family affairs, with €16.9 billion, an increase of 9.7 per cent.

Health received €16.1 billion, an increase of 7.7 per cent.

Fine Gael finance spokesman and deputy leader Richard Bruton said that growth in day-to-day spending was more than 50 per cent higher than economic growth, forcing "the greatest ever increase in exchequer borrowing to €4.9 billion".

The estimates were published as a survey of economic forecasts predicted that economic growth in 2008 could be significantly lower than expected by a range of commentators if the history of an "optimistic bias" in economic forecasting repeats itself, according to consultancy DKM.

The average forecast for economic growth this year is for it to slow down to 2.6 per cent, but DKM chairman Brendan Dowling said that recessions were often forecast as slowdowns.

"There tends to be an optimistic bias in downturns, not always offset by a pessimistic bias in upturns," he said.

"Consumption and export forecasts - the expected drivers of growth in 2008 - may turn out to be on the optimistic side, especially given the turmoil in the international economy. If this turns out to be the case, then 2008 growth could be significantly lower than expected."

DKM yesterday published the first issue of Economy Watch, its snapshot of Irish economic forecasts.

The European Commission cut its forecast for euro zone economic growth and predicted inflation will accelerate to the fastest pace since the single currency's debut, highlighting the dilemma facing the region's central bank.

Inflation will average 2.6 per cent this year, the Brussels- based commission said yesterday, increasing its previous estimate by 0.5 percentage point.

The economy of the 15 nations that use the euro will expand 1.8 per cent, it forecast, below the 2.2 per cent predicted in November and the weakest since 2005. - (Additional reporting: Bloomberg)