The construction industry has been particularly hard hit by the recession The Irish Republic's economy has suffered its largest contraction in recent decades. The economy shrank by 7.5% in the last three months of 2008 compared with the same period a year earlier, the official statistics office said. The construction industry, which has faced a housing market slump, suffered a 24% fall in output, the biggest fall on record. In the whole of 2008 the economy shrank by 2.3%, the first decline since 1983. Once known as the Celtic Tiger due to the strong growth it enjoyed, Ireland has experienced a sharp downturn, becoming the first eurozone country to fall into recession in 2008. We are of the view that GDP is set to decline in the order of 6.5% for the current year
Deirdre Ryan, Goodbody Stockbrokers The declines announced by the Central Statistics Office (CSO) were significantly larger than had been expected. Analysts are now expecting Ireland's economy to shrink by much more than expected in 2009. "We are of the view that GDP is set to decline in the order of 6.5% for the current year... given the extent of the downward momentum at the turn of the year as evidenced by today's data," said Deirdre Ryan from Goodbody Stockbrokers. Housing market collapse Analysts suggest Ireland is having a tougher time than most during the recession because added to the general economic crisis it is also dealing with a dramatic collapse in house building. Irish homes built 2006: 90,000 2007: 77,000 2008: 45,000 2009: 20,000 (estimate) Source: Construction Industry Federation During the housing boom in 2006, house building accounted for 15% of Irish GDP. "At its peak in 2006 90,000 dwellings were built. That was clearly at an unsustainable level," said Dr Alan Barrett from economic think tank ERSI. In the last 12 months it is estimated only half that amount were built. "We had hoped the market would gently decline but it essentially evaporated between 2007 and 2008," said Dr Barrett. Problems for the construction industry are getting worse because of a lack of government funding for public infrastructure projects, according to Cathal Lee, a spokesperson for the construction industry in Ireland. "The decline was first felt in the residential sector. It has now spread to commercial developments and to general contracts and projects like schools and hospitals," he said. Ireland's deteriorating economy has also hit public finances hard. Ireland's budget deficit is expected to reach 9.5% of GDP in 2009, the highest in the EU and far above the EU rules of 3%. Unemployment has nearly doubled, too. At the start of 2008 it was running at 5%. It is now more like 10%. The country is also suffering from deflation - a period of falling prices - which could pose a big risk for the economy because it encourages people to defer purchases in the hope of getting them cheaper later on. People are being very careful with their money according to Sean Murphy, director of policy at Chambers Ireland, which represents 13,000 businesses. But he is remaining positive believing the decline in sales is "indicative of the flexibility of Irish society and their willingness to drive down debt and increase their personal savings".
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The economy of Ireland shrank by 7.5% in the last quarter of 2008 compared to the same period a year previously, according to official statistics. The decline is the worst in decades. For the entire period of 2008, the economy contracted by 2.3%, the first loss since 1983.

The construction industry has suffered badly as a result of the recession, with a 24% fall in output, the largest decline ever recorded. Industrial output plunged at an annualised rate of 12.5%.

Unemployment has also shot up. It currently stands at around 10%, twice as high as the levels reported last year. The economy has also experienced deflation.

Alan McQuaid, the senior economist at Bloxhams Stockbrokers, said that the statistics "highlight the extent of the Irish economic out-turn and the huge task facing the Government in attempting to get the country’s public finances back in order." 

"Quite simply, there is no hope of sorting out our budgetary position by 2013 without economic growth, and we are a long way off that at the moment," McQuaid said, noting that "(...) one has to go back to the 1956-1958 period for the last time we had a decrease of this magnitude."

"(...) As things currently stand, it is not hard to see double digit declines in real GDP over the coming quarters," he said. "The extreme weakness of the economy at this point in time must also raise serious questions marks about the wisdom of the Government’s intention of imposing further income levies on already hard-pressed consumers and PAYE workers. All that can be said is that the outlook for economic output and employment in 2009 are fairly bleak indeed."

The Irish government is creating an emergency budget, due to be unveiled in April.