The Central Bank says the persistent strains in financial markets are limiting Irish prospects for economic recovery.

In its latest quarterly bulletin the bank says the deal reached by European leaders in June has not succeeded in resolving market concerns in the Eurozone.

The Central Bank is forecasting economic growth this year will slow to around 0.7%.

That is down from 1.4% in 2011 and a slight increase on its last quarterly outlook.

However its projection of economic growth of 1.9% in 2013 is lower than its previous forecast for next year.

The Central Bank also says there are signs that government expenditure in certain areas is running ahead of target.

But it assumes adjustments will be made to bring the level of spending in line with budgetary projections.