The Central Bank says it expects the economy to contract by 4.7% this year, as Ireland continues to be impacted by global recession and falling demand.
In its latest economic forecast, the Central Bank says the contraction will lead to significant job losses with 100,000 fewer people working by the end of the year.
The bank says unpalatable short-term measures are needed if the economy is to stabilise in 2010.
In one of the most negative outlooks published so far, the bank says the contraction in the economy this year will more than cancel out growth the economy enjoyed in the boom year of 2007.
In the housing market, blamed for many of the ills, the Central Bank says completions could fall to as low as 22,000 units this year compared to 52,000 last year, despite their being more affordable.
Last year saw the first drop in employment in many years. The trend is set to accelerate and assuming some emigration, unemployment is likely to average 9.4% of the labour force this year.
However, it believes Ireland has the potential to grow strongly again if productivity can be improved but the potential is not a given and the Central Bank says unpalatable measures are needed.
The bank says the largest item of government expenditure, the public sector pay bill, is ‘beyond the scope of current resources’.
It says the public sector needs to use its purchasing power to drive hard bargains with the services sector.
The central bank suggests reducing tax avoidance schemes and imposing user charges for public services.
It describes Ireland as unusual in not applying an annual residential property tax.
