The Central Bank has lowered its economic forecast for the year, predicting the economy will grow by 0.8 per cent in 2011.

That's slightly lower than the bank predicted in its April bulletin, when it said the economy would grow by 0.9 per cent.

The bulletin also warned that gross national product, which excludes repatriated profits of multinational firms, may decline by about 0.3 per cent. However, it predicted stronger growth in 2012, with gross domestic product expected to expand by 2.1 per cent and a rise of 1 per cent in GNP.

"The broad narrative behind these figures remains unchanged. Exports continue to grow while domestic demand remains weak, although the contraction in the latter is gradually easing," the bank said.

"Reflecting the modest rate of output growth and the fact that it is driven by sectors that are not labour intensive, employment has yet to stabilise. It will be the end of this year or, more likely, next year before any employment growth starts to emerge."

The bank pointed to the ongoing tensions euro area financial markets, a slowdown in the US and commodity price movements as risks that were contributing to uncertainty over growth in Ireland.

It predicted exports will grow by 6.4 per cent this year and by 6.2 per cent in 2012, as external demand moderates during the remainder of the year and into 2012.

The bank said unemployment may have peaked by "this largely reflects a pick-up in net outward migration, combined with lower participation"

It predicted continued contraction this year, by about 1.7 per cent, and a marginal increase in 2012.