The International Monetary Fund has reduced its growth forecast for Ireland and now estimates growth this year will be 0.5%.

This is compared to 0.9% last November when the European Union and IMF agreed a €67bn funding programme with Ireland.

The IMF made the comments in its World Economic Outlook, which was published today.

Growth for the Euro Area is estimated to be 1.6%. In advanced economies worldwide, growth is estimated at 2.5%, with developing world growth put at 6.5%.

Overall global growth is put at 4.5%, compared to 5% last year. Rising oil prices and associated political turmoil are the main causes of a slight slowdown in the global economy.

The IMF estimates Irish unemployment will average 14.5% this year, compared with just below 10% for the euro area.

Inflation in Ireland is forecast to be 0.5%, compared with a euro area average of 2.3%.

The IMF says the European Central Bank should continue with its low interest rate policy to support the 'fragile' recovery and help to offset the effects of budget cutbacks on economic growth.

It says low interest rates are appropriate as long as there is low core inflation and lots of excess capacity.

'The ECB's extraordinary measures to support the banking industry should only be removed gradually as systemic uncertainty recedes.'

The IMF also says European governments should urgently cut the interest rates charged on loans from the European Financial Stability Fund.

On Europe's banking crisis, it says it is critical to reduce uncertainty about asset quality, identify and recapitalise viable banks and 'resolve' weak banks.

Some countries - notably Spain - have made more progress than others in this regard. It says excess capacity in banking systems needs to be removed by removing weak banks.