The Economic and Social Research Institute has warned that economic output will fall dramatically next year and that unemployment will reach 10% of the labour force.
In one of its gloomiest commentaries, the ESRI said it would be very difficult for the Government to afford the national pay deal in these circumstances, and that pay cuts in the public sector should be considered instead.
2008 was a very bad year in terms of economic activity in Ireland, with contractions in virtually all sectors of the economy, but next year looks set to be even worse. That is the considered view of the country's leading independent economic think-tank.
Its latest Quarterly Economic Report warns of a 4.6% fall in activity in 2009, which would be the largest annual slump in economic activity ever recorded.
The ESRI forecast suggests that 117,000 jobs will be wiped out, and net emigration will soar to 50,000 people, which would be one of the largest annual migration totals ever recorded.
The contraction in activity, it says, will plunge our public finances deeply into deficit. The ESRI says Government borrowing will soar to almost €17 billion in 2009. The General Government Deficit will exceed 10% of GDP - close to four times the EU borrowing limit - and the public debt burden will have doubled in two years.
It warns of the need for further tax increases, says the national pay deal needs to be reassessed, and that pay cuts in the public sector should now be considered.
The report also contains new research that showing that, even after allowing for factors like education and experience, public sector employees are currently paid an average of 20% more than their private sector equivalents.
