Ireland beat the budget deficit target set under its EU/IMF bailout by more than a percentage point in 2011, the government said on Monday, making it more likely that it would stay on track this year despite cuts to growth forecasts.

Dublin said that stripping out one-off capital injections into its banks, the country's underlying deficit for the year was 9.4 percent of gross domestic product (GDP), compared with the 10.6 percent target.

Ireland's underlying deficit was still the largest in the European Union, more than twice Portugal's shortfall and higher than the 9.1 percent deficit reported in Greece and 8.5 percent in Spain.

The government is set to cut its growth forecast for the year next week but given the better-than-expected deficit starting point, it said it was on target to meet its 2012 deficit target of 8.6 percent.

Ireland is seen as the most likely of the euro zone's three bailed-out countries to emerge from its EU/IMF programme, but some economists have warned it may struggle to meet its deficit targets due to slower growth in key export markets.

The figures that (Irish finance minister) Michael Noonan is quoting are encouraging in the sense that the underlying position is a lot better than everyone assumed, said Alan McQuaid, chief economist at Bloxham Stockbrokers. We're certainly heading in the right direction.

He warned however that the good news could be overshadowed by wider concerns about the euro zone which could push up bond yields of peripheral euro zone countries in the near term.

Investors on Monday were adjusting to the strong showing by Socialist challenger Francois Hollande in the first round of France's presidential election, as a budget crisis in the Netherlands pushed the government to resign.

PROPERTY AGENCY SALE

Ireland's underlying budget deficit, which is used for its targets under its bailout programme, was half a percentage point lower than a revised government estimate of 10.1 percent given in December, according to data from EU statistics agency Eurostat.

The headline deficit, which includes capital injections into financial institutions, was 13.1 percent, but the government said this was inflated by one off spending that would have no future impact on deficits or targets.

Most of the difference was due to capital injections into banks that took place in July last year that totalled 3.7 percentage points of GDP, the finance ministry said.

Noonan said data for tax receipts and expenditure for the first quarter of the year indicate the government will meet its 8.6 percent deficit target for 2012.

He added he was confident that Ireland could keep 30 billion euros of debt owed by state-run property agency NAMA from appearing on the country's balance sheet despite a shift in the agency's ownership structure.

The agency is 51 percent controlled by three private companies, including Irish Life Assurance plc. The state's decision to buy Irish Life meant the agency risked falling into full state control.

The sale of the Irish Life shareholding in NAMA to private investors in the coming weeks will remove this concern, the finance ministry said.

(Additional reporting by Conor Humphries; Editing by Jeremy Gaunt)