More woe for Ireland as central bank cuts growth forecast

The Celtic Tiger's woes mounted today after Ireland's central bank said its beleaguered economy would barely grow this year.

The central bank now expects growth of just 0.2% this year after slashing its own July forecast of an 0.8% advance and well below the Irish government's 1% prediction.

The latest gloom comes after ministers warned last week that the cost of bailing out the country's crippled banks would send Ireland's deficit soaring to an eye-watering 32% of GDP this year.

The bank's said Ireland faces "challenging decisions" on a range of issues after a recession of "almost unprecedented depth and duration".

"By far the most pressing are those relating to tackling the underlying fiscal situation, normalising the banking sector and regaining lost competitiveness," it said.

The weaker economic backdrop will make it even more difficult for Ireland to tackle the worst budget deficit in the EU.

But the central bank said the government had no choice but to make deeper budget cuts than originally planned as international concerns about Ireland's finances mount.

"Against the background of sharply increased concerns about fiscal sustainability, the main priority in the short-term is to ensure that the 2011 budget credibly demonstrates the first step of a reprogrammed tighter fiscal plan," it added.

The bank predicts 2.4% growth next year but this forecast is at risk from a further slowdown in the global economy.