The Central Bank has said the economy could shrink this year by up to 14%, while it has also warned that unemployment could average as high as 17% this year.
In its latest Quarterly Bulletin, the Central Bank also highlighted the risks to the economy of a no-deal Brexit.
The Central Bank said there is considerable uncertainty attached to its forecasts.
It said it believed GDP could fall this year by 9% under its baseline scenario and 13.8% under its "severe" scenario. GDP will not get back to 2019 levels until 2022.
It also cautioned that any recovery will still be tempered by precautionary behaviour and continued social distancing.
Labour intensive activities such as retail, food and beverage, accommodation, tourism and travel will be worse hit.
The Central Bank pointed out that continued strong growth in the Information & Communications Technology (ICT) and pharmaceutical sectors have offset declines in other parts of the economy.
In the labour market, the quarterly bulletin forecasts that unemployment will remain between 14.5% and 16.6% this year.
It found that at the peak of the Covid restrictions in mid-April, 72% of workers in the accommodation and food service sector were in receipt of the Pandemic Unemployment Payment (PUP) and over half of all construction workers.
Since then the number of construction workers on the PUP has declined by 42%.
However, very few jobs have been regained in the accommodation and food service sector with only an 8% decline.
This may improve after this week's stage of reopening restaurants and bars.
The Central Bank also noted a massive increase in savings.
Deposits were up €3.5 billion in April and €1.5 billion in May. This compares to monthly averages of just under €600m pre-pandemic.
There has also been a corresponding decline in the demand for credit.
The glut of savings, the bank said, could provide a resource for a consumer-led recovery.
Early data from the start of June show card payments recovering close to 2019 levels after falling 30% in April.
Card use has been boosted by a decline in cash with ATM withdrawals down by between 40-50% year-on-year.
More companies are also developing an online presence, with a 40% increase in IE domain name registrations since March.
In it latest econonic report, the Central Bank also noted the continuing uncertainty surrounding Brexit.
It said the immediate impact of a no-deal is hard to quantify but that over time, GDP could be reduced by between 3.5% and 5%.
It noted that the Covid-19 pandemic may have hampered firms' efforts to diversify into new markets away from the UK and will also have made them more financially constrained.
The report warns about high public debt levels which could leave the government finances vulnerable to future shocks and interest rate increases.
It says the increase in the government deficit and debt ratios as a result of various spending measures was warranted and necessary.
It says that the drop in output may not have been severe as initially believed because of the measures introduced.
"We've seen significant policy responses and they were absolutely necessary and warranted," Mark Cassidy, Director of Economics and Statistics at the Central Bank said.
"We provide an estimate as to what the combined impact of those might have been on economic growth and we find that the policy measures combined have reduced the negative impact by 3.5 to 4 percentage points and will contribute to growth next year."
However, the bank says the government must in due course provide for a return to more sustainable deficit and debt positions.
"We're going to come out with much higher public debt than we went into the crisis. That debt appears sustainable over the medium term and that reflects the forecasts for a return to economic growth, coupled with supportive funding environment."
"High debt does leave the economy more vulnerable to future shocks. When the recovery is sufficiently strong it will be important to reduce the debt levels to make us less vulnerable," Mark Cassidy said.
An economist based in University College Cork said the latest economic bulletin from the Central Bank makes it clear that the economic impact of the pandemic depends on how long the public health crisis will last.
Seamus Coffey said uncertainty is the underlying point in the bulletin, but it does point to the economy beginning to recover later this year, however, the impact of Brexit on food and other producers could hit in January.
Mr Coffey, who was the former chair of the Fiscal Council, said the temporary employment support measures put in place, as well as increased spending on health will impact on debt levels and any new spending programme under will also require financing.
However, he said that as the economy recovers we should be able to fund measures including public sector pay.
Mr Coffey said public finances are in a better condition than they were ten years ago and we will recover once confidence returns and this will bring the deficit down and employment will increase over time.