The Government has substantially cut its growth forecasts for next year and warned it will take longer for the economy to return to “robust” expansion.

The projections come in the Medium-Term Fiscal Statement, released today, which sets the backdrop against which the Government forms the Budget.

The document reaffirms the Government’s judgment that €3.5 billion needs to be extracted from the economy in next month’s Budget, with further adjustments of €3.1 billion and €2 billion required in 2014 and 2015 respectively.

This will allow the State to meet the deficit targets contained within the terms of the EU/IMF bailout.

For 2013, the Government has cut its GDP forecast by 0.75 percentage points to 1.5 per cent, reflecting “the deterioration in the external environment over the past six months or so”.

GDP growth is expected to rise to 2.5 per cent in 2014 and to 2.9 per cent in 2015. For this year, the Government has pencilled in growth of 0.9 per cent, which is slightly ahead of its previous forecast, helped by positive economic data for the third quarter.

It expects the jobs market to remain problematic, with no uptick anticipated until the second half of next year.

The jobless rate will remain relatively high even until the middle of the decade, according to the analysis.

The unemployment rate is forecast to be more or less unchanged at 14.5 per cent in 2013, before falling to 13.9 per cent in 2014 and 13 per cent in 2015.

The Government notes that the projections contained within the outlook do not take any account of any benefits that may flow from the June euro summit, which could help to reduce the State’s debt burden.

“Technical work is continuing in that regard,” according to the statement.