Ireland has officially fallen into recession, new figures revealed today.
According to the Central Statistics Office, our once-aggressive economy contracted by 1% in the first six months of the year.
Dubbed the Celtic Tiger during massive growth in the late 1990s, the business sector is now facing its most difficult period since high unemployment and emigration hit the 1980s.
The Department of Finance pointed to the crumbling property market and the international credit crunch for the alarming figures.
A government spokesman said: “As expected, lower levels of new house building had a major restraining influence on growth in the second quarter, as is evident from the very weak investment figures.
“Other factors at work include higher commodity prices, global financial market problems, weak demand in our major trading partners and adverse exchange rate movements.”
The figures support predictions from some of the country's leading financial experts, including those at the state's influential think-tank the Economic and Social Research Institute (ESRI).
It warned earlier this year that Ireland was facing its first recession since 1983, unemployment would rise and 20,000 people would emigrate.
Compounding these problems, the Government is facing a massive Budget deficit of between €5bn and €7.5bn - which may take several years to recover – as the tax take dramatically fell this year.
The Budget, traditionally held in December, was moved forward six weeks by Taoiseach Brian Cowen in an attempt to reduce the knock-on effects of the now shrinking economy.
The CSO National Accounts report said the value of goods and services produced by home-grown and international businesses in Ireland - known as Gross Domestic Product (GDP) - fell by 1.3% in the first quarter and again by 0.8% in the following three months.
Two successive falls in economic growth is internationally recognised as a recession.
As expected, the construction sector took the biggest hit, falling by 12.2% in the three months from April to June. That followed a 16% drop in the first three months of the year.
The CSO report said consumer spending remained strong in the early part of the year, showing 3.6% growth for the first quarter, but the next three months have been hit by a drop of 1.4%.
This is a dramatic downturn on the last three years when consumption growth averaged more than 6%.