The Central Bank has cut growth prospects for the economy. In its latest forecast it is still predicting growth of 1.2% in 2013.

The Bank had forecast economic growth this year of 1.3% but has cut that slightly.

The bank blames weaker exports because of sluggish global demand. But it does say that better domestic demand will offset somewhat what could be a worse downgrade.

"With growth in trading partner countries expected to slow a little more than previously assumed, weaker external demand is set to dampen Irish export growth in 2013" it said in a statement.

Upbeat forecast for 2014

But the bank believes that growth will more than double in 2014 to 2.5%. It says the projection "is based on consensus assumptions from the main international institutions, which forecast a recovery in external demand back towards its long run trend".

It notes the slow progress by banks in dealing with mortgage arrears and that this "has prolonged the uncertainty persisting about bank asset quality and profitability prospects" and has also inhibited the resolution of problems for distressed borrowers. But it says the plan set out to tackle this will strengthen the prospects for recovery.

And it warns that while significant progress has been made on competitiveness in the economy more work remains in this area.

The Central Bank says "Adherence to EU/IMF Programme targets remains strong and further progress on the main policy challenges continues to be made". It concludes that these forecasts are very sensitive to developments in the international and European economy.

Lars Frisell of the Central Bank answers questions on warnings from the IMF about unemployment and the bailout.