Preliminary estimates of GDP suggest that the economy expanded by 0.4 per cent in the fourth quarter of last year, bringing the level of output in the year as a whole to 1.7 per cent above the level of output in 2001. Domestic demand is estimated to have grown by around 2½ per cent in 2002. However the weakness of the external sector exerted a drag on growth, reducing GDP by almost 1 per cent. As a result overall growth remained below trend. We expect the external sector to recover as world trade is forecast to grow more strongly this year and next and due to the expected depreciation of sterling following the strength of the euro. Nevertheless, the external sector is expected to remain a significant drag on growth this year, again reducing GDP by around 1 per cent.