Irish gross domestic product (GDP) will grow by just 0.4 per cent this year and 1.4 per cent in 2013, according to Davy.

The company has sharply cut its previous forecast for GDP growth of 1.7 per cent in 2012 and 1.6 per cent in 2013.

It has also cuts its gross national product (GNP) - a narrower measure of economic activity which excludes multinational firms. The company predicts GNP will contract by 0.4 per cent in 2012 compared to its previous forecast of 1 per cent.

Davy said it expected export growth to slow from 4.5 per cent in 2011 to 2.8 per cent this year, despite gains in competitiveness. It sees employment falling by 0.4 per cent in 2012, but forecasts it will rise gradually in 2013.

The organisation said it does not expect Ireland to hit the targets set out for the budget deficit in 2012 and 2013.

Davy said the key reason for its revisions was the deterioration in consumer and investor confidence in the euro zone.

The organisation has revised down its forecast for consumer spending growth to a 1.7 per cent decline in 2012 before a 0.5 per cent expansion next year.

In addition, investment spending is expected to fall by 0.2 per cent in 2012 and to rise by 4.4 per cent in 2013.

Goodbody stockbrokers last week also downgraded its 2012 GDP forecast to 0.7 per cent from 1.2 per cent.