THE International Monetary Fund paid a further €770m as part of the country's bailout and predicted the economy will pick up in the rest of the year.
It added in a brief statement last night that employment here had improved, while noting that long-term unemployment was still a serious concern.
"The Irish economy grew 0.4pc in the second quarter but still contracted 1.2pc year-on-year as exports dipped and domestic demand continued to decline at the pace seen in 2012," the IMF said, following the completion of the fund's 11th review of the Irish economy.
"At the same time, employment grew 1.8pc year-on-year and recent indicators suggest a growth pick-up in the second half of 2013."
Some 58pc of the unemployed have been out of work for over a year, the IMF added.
It said the economy had been performing in line with expectations so far this year, and predicted that the fiscal deficit would be about 6.8pc of gross domestic product. Public debt is seen as hitting 123pc of GDP.
Meanwhile, Enda Kenny pushed German Chancellor Angela Merkel to agree a bank debt deal after her election victory. He argued that such a deal would ensure that Ireland has a successful exit from the bailout in December.
Although the Government has already borrowed enough money to pay for the country's running costs next year, it is worried about borrowing costs rising again in future if the burden of the €64bn bank bailout is not reduced.
Mr Kenny made his comments during a 10-minute phone conversation with Ms Merkel.
The Government is looking to get back some of the €30bn it has pumped into the banks.
It is pinning its hopes on the European Stability Mechanism. This will be funded to a large extent by German taxpayers.
The Government is hoping that Ms Merkel's praise will make it easier to get a bank debt deal next year. But it will be an uphill battle because she has also said there would be no shift in her policy on Europe, the eurozone and Ireland.
By Michael Brennan and Thomas Molloy