The Irish economy is set to contract further next year, adding to current financial woes, according to the Bank of Ireland.

The bank’s latest quarterly projection has suggested national income will drop by almost 1.6% in 2008, which will represent the first decline since 1983.

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Next year will also see further sharp declines in output, according to the bank, which has forecast falls in construction spend.

The Bank of Ireland suggested this decline in building appears certain at this stage.

Unemployment will hit 7% next year, which according to the bank will move the economy away from full employment for the first time in 10 years.

Full employment assumes a jobless rate of 167,000, and up until this year Ireland had enjoyed a decade of full employment.

(PR)