THE ECONOMY will grow by a modest 0.9 per cent this year, according to the latest forecast from the State think tank the Economic and Social Research Institute.

However, if the outcome this year is weaker than this, it may affect the Government’s budgetary targets, one of the authors of the institute’s latest Quarterly Economic Commentary, published today, said.

Prof Joe Durkan, at a press briefing yesterday, said that if growth this year were to be 0.5 per cent of gross domestic product, it would put the Government’s targets in danger.

The European Commission yesterday predicted 0.5 per cent growth for the Irish economy in 2012.

This is the same rate forecast by the EU-IMF troika last month but less than half the 1.1 per cent the commission forecast in the autumn.

Asked whether the reduction in the forecast for Ireland would lead to any demands for further cutbacks from the Government, economics commissioner Olli Rehn gave no indication either way.

“Concerning Ireland . . . we conduct our more in-depth assessment in the context of quarterly reviews, as we will do next time we conduct a review,” he said.

Prof Durkan said he would be more concerned about other countries in the EU, such as the UK and France, meeting their targets, than he would be worried about Ireland.

This time last year the ESRI was predicting 2 per cent growth for Ireland for 2012. It expects the growth figure for 2011 to be 0.9 per cent. Last year was the first year the economy grew on an annual basis for three years.

Prof Durkan said it would be his preference that the revenue from any sale of State assets would be used to pay down debt. “One would like to see the debt paid down as quickly as possible,” agreed co-author David Duffy.

The ESRI expects government debt as a percentage of GDP to peak at 120 per cent in 2013.

Exports are forecast to grow by 3.4 per cent in 2012, and 3.8 per cent in 2013, down from 6.3 per cent in 2011. Given that the rate of export growth faltered in the second half of 2011, if this were to continue it could hurt economic growth, Mr Duffy said.