The Irish economy will contract by 8.7 per cent this year and by 2.5 per cent in 2010, according to a new forecast by accounting firm PricewaterhouseCoopers (PwC).
The assessment is more negative than the prediction of an 8 per cent contraction made in a Budget day forecast by Department of Finance earlier this month.
In its analysis PwC said a recovery is “unlikely” before the second-half of next year. PwC expects Ireland to have the sharpest contraction among eurozone countries and the UK this year and next.
The impact of the measures in the Budget were likely to exacerbate the severity of the recession in the short-term as consumers and businesses face higher costs, it added.
PwC notes the April Budget will help contain significant tax shortfalls and the rise in public sector debt. Consumers were likely to increase their precautionary saving in response to rising unemployment and the continuing fall in house prices.
Yael Selfin, head of macro economic consulting at PwC said: “The tax measures announced in the supplementary Irish budget will compound the pressures on Irish consumers and businesses in the short term.
“Due to the scale of the anticipated budget deficit, an upturn is likely to be export-led. As this will rely on economic recovery elsewhere, the outlook for the Irish economy will remain negative until well into 2010.”