The Irish economy is expected to shrink 6.9% this year, following a 2.3% decline in 2008, the central bank said Friday. The GDP forecast for this year was slashed from 4% decline estimated initially. For 2010, the central bank estimates 3% contraction.

In its latest Quarterly Bulletin, the Central Bank and Financial Services Authority of Ireland said the standardized jobless rate is seen at 14.4% in 2010, up from 11.8% this year.

According to Finance Ministry, the budget deficit surged to EUR 3.7 billion in the first quarter.

The government is set to hold an emergency budget on April 7. The central bank noted that government expenditure increased at an average rate of around 11% a year for the past three years. It is inevitable that both current and capital spending be reduced, the bank said.

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