Two more reports on the economy have pointed to a worsening of economic conditions in the past few months.
Ulster Bank has lowered its growth forecast for this year, saying the domestic and international outlooks have deteriorated since its last report in April.
The bank, which had previously thought the economy would grow by 0.5% this year, now sees GNP falling by 0.3%. Its report says the economy will return to growth in 2009, but only at a rate of 0.5%, as it thinks the slowdown will be longer than previously expected.
National Irish Bank is slightly less pessimistic, seeing GDP growth of 1% for 2008, down from 6% in 2007. The bank's latest quarterly economic commentary says that the first six months of the year has seen a 'rapid deterioration' in the Irish economy.
Ulster Bank's report has also changed its outlook for house prices. Having previously forecast that prices would level off later this year, it now expects further falls, leading to a 9% drop for the year as a whole.
But the bank thinks consumer spending will hold up this year, rising by 1.5%, while it has raised its forecast for house completions this year slightly to 44,000, reflecting stronger than expected activity in the first five months. The bank says house building will fall to 30,000 in 2009, however, before picking up in 2010.
It expects inflation to average 5% this year, falling to 3.5% next year as recent rises in food, energy and mortgage rates gradually fall out of the comparison. And Ulster Bank believes the Government deficit this year will come in just below the EU limit of 3% of GDP.
NIB says that while the fall in the housing market from its 2005/2006 peak was the start of the slowdown, its impact is fast spreading to other areas of the economy. The slowdown is now coinciding with rising inflation, falling consumer confidence, slowing international growth and the fall out from the credit crunch.
NIB says that the slowdown in consumer spending is now taking over from lower house-building as the key driver of the worsening outlook for the economy. Consumers have been hit by higher prices for energy, food and housing and the bank cautions that these pressures will actually grow as the year goes on.
The bank also predicts that long-term unemployment will jump from its current level of 28,000 to 45,000 - and it adds that it will not fall back until 2011 or 2012. While previously male-dominated, the increased number of women out of work is another indication that the economic slowdown is spreading beyond the building industry, it adds.
Today's report says that the Dublin and Cork areas will likely avoid much of the worst of the economic slowdown, while the greatest impact will be felt in the border, midlands and west and south east regions.