The International Monetary Fund will cut its Irish economic growth estimate for this year and next as the outlook for its main trading partners, the euro region, U.S. and U.K. “worsened substantially.”

The Washington-based fund will lower its 2011 gross domestic product forecast for the country to 0.4 percent and 2012 projection to 1.5 percent as part of its world economic outlook this month, it said in a report Wednesday. The IMF had been forecasting growth of 0.6 percent and 1.9 percent, respectively.

Irish Finance Minister Michael Noonan said in an interview Tuesday that the global economy had begun to move against the nation, after spurring growth in the first half of the year. The country’s trade surplus widened to a record in June, driven by exports of dairy, medical and pharmaceutical products. 

“Exports have been strong, although recent declines in new export orders could indicate softer export growth ahead,” the IMF, which is contributing 22.5 billion euros ($31.6 billion) to Ireland’s bailout, said.

The impact of slowing growth on Ireland’s debt outlook is “modest” and is expected to be offset by an agreement in July to cut the interest rate on the European part of its bailout, the IMF said. Ireland is on target to reach the fund’s deficit target of 10.5 percent in 2011, the IMF said.

Since the end of June, Irish securities with a duration of more than 1 year have returned 21 percent, the highest among the 26 government debt markets tracked in indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. (Bloomberg)

Ireland was forced to seek a rescue from the European Union and the IMF in November as a banking crisis overwhelmed the government. The state hasn’t sold a benchmark bond since August 2010.

The IMF said “market financing is assumed to increase modestly in 2012 and to expand in 2013.” 

(Bloomberg)