The economy is set to shrink by almost 8% this year and will drop a further 1.8% in 2010, according to PricewaterhouseCoopers’ latest outlook.
PwC also said that an improvement in exports and investment saw the economy stay on an even keel in the second quarter of this year.
The report predicts that Ireland will have deflation of 1.6% this year, and that stabilising the financial sector and attracting foreign direct investment will be key to any recovery.
The report also foresees economic output contracting by 4.1% in the euro zone this year, followed by a modest recovery in 2010.
A fall in tax take and rising unemployment across the euro zone is putting pressure on public finances, it added.
The recent strength of the euro was also identified as a problem for trade with outside markets.
