DUBLIN, April 2 (Reuters) - The Irish government expects the economy to contract 6.75 percent this year and, unless corrective action is taken, it forecasts the budget deficit will balloon to 12.75 percent of gross domestic product.
"There is no question that there has been a very serious deterioration in the public finances," Finance Minister Brian Lenihan said on Thursday after figures showed the country posting a budget deficit of 3.7 billion euros ($4.94 billion) in the first quarter.
"The government has already taken action to correct this unsustainable position and we must recognise that the budgetary position will take a number of years to correct."
Lenihan lowered his forecast for economic output this year to a 6.75 percent fall from a previous forecast of a 6 percent reduction. He expects the economy to contract 7 percent on a Gross National Product (GNP) basis.
(Reporting by Carmel Crimmins; editing by David Stamp)