A new report on the economy suggests that the recession will last throughout much of next year and hopes of a recovery in 2010 are fading.
Stockbroker Davy forecasts that economic output as measured by gross national product (GNP) will shrink by 3.4% next year after a 2% decline this year.
The report describes the deterioration in the economy since March as 'remarkable', blaming the tightening of the availability of credit.
Davy warns that unemployment may reach 8.5% by the end of next year, but inflation will fall to 1%.
It also says lower consumer spending elsewhere will affect exports, with the banking crisis hitting financial and business service exports in particular.
On the property market, the stockbroker says 'real progress' will not be made until property prices fall to a clearing level and mortgage availability improves. It also believes tax revenue will drop by 8% next year, mainly due to the weak property sector.
Davy says the cutback in capital spending by the Government next year is unfortunate but 'not too severe' It adds that Ireland is not breaking EU rules on deficits as any economy experiencing a decline in gross domestic product is not exposed to censure.
