National Irish Bank (NIB) chief economist Dr Ronnie O'Toole yesterday issued an upbeat outlook for 2008, saying the economy, bolstered by strong growth in services exports, would grow 3.9 per cent this year, writes Simon Carswell, Finance Correspondent.

In the latest NIB Quarterly Economic Report, Dr O'Toole says the slowdown in housebuilding will be less severe than earlier estimates by other economists, with 60,000 houses to be built this year.

"The economic pessimism has been overdone. The fall in construction will be offset by strong exports in services, with a rebound in economic growth in the second half of the year," he said. Ireland is the fifth most important exporter of commercial services in the world, according to Dr O'Toole. He attributes the economic growth of 5.7 per cent in 2007 to the resurgence in exports.

He expects employment growth to slow this year, with 40,000 new jobs created, down from 70,000 in 2007, despite an expected 10,000 job losses in the construction sector in 2008. House prices will level off by the summer, the outlook states, as buyers return to the market following the budget changes in December and continued immigration.

Dr O'Toole has revised downwards his economic growth estimate for 2008 from 4.7 per cent in October due to a faster than expected correction in the housing market and the slowdown in the world economy. His revised estimate is still above the 2.1 per cent forecast recently by Davy stockbrokers, the 2.3 per cent by the Economic and Social Research Institute and the 2.8 per cent by the Government.