IRELAND'S economy is expected to shrink by 8.5pc this year due to the impact of Covid-19, according to indicators from the European Commission.
The anticipated fall is greater than the European Union average of 8.3pc.
The estimates, from the Summer 2020 Economic Forecast released yesterday, show the overall contraction in the EU is larger than had been initially predicted in the Commission's spring forecast.
Meanwhile, the recovery next year is also expected to be weaker than first projected.
It comes as large swaths of the economy across Europe have experienced a dramatic slowdown in activity on the back of restrictions aimed at limiting the spread of the global pandemic, EU leaders are currently working on agreeing a €750bn stimulus package proposed by the commission.
Commission vice president Valdis Dombrovskis said the economic impact of the lockdown is "more severe" than was initially predicted.
"We continue to navigate in stormy waters and face many risks, including another major wave of infections," Mr Dombrovskis said.
"If anything, this forecast is a powerful illustration of why we need a deal on our ambitious recovery package, NextGenerationEU, to help the economy," he added.
With most member states introduced lockdown measures in mid-March, a far longer period of disruption and lockdown has taken place in the second quarter of 2020 so economic output is expected to have contracted significantly more than in the first three months of this year. Nonetheless, early data for May and June suggest the worst may have passed, according to the commission.
The recovery is expected to gain traction in the second half of this year, albeit remaining incomplete and uneven across countries.
Meanwhile, the economy here is expected to return to growth of 6.3pc next year, higher than the EU expected average of 5.8pc.
However, the Commission warned the risks to the economic forecast are "exceptionally high and mainly to the downside".
It said the scale and duration of the pandemic, and of possibly necessary future lockdown measures, remain unknown.
The forecast assumes lockdown measures will continue to ease and there will not be a second wave of infections.
There remains a risk the labour market could suffer more long-term damage than expected, and liquidity difficulties could turn into solvency problems for many companies.
In addition, the Commission warned a failure to secure an agreement on the future trading relationship between the UK and the European Union could also result in lower growth, particularly for the UK. This in turn could have a negative impact on Ireland as the UK remains a vital trading partner, particularly in areas of the economy such as agriculture.
Elsewhere, protectionist policies and an excessive turning away from global production chains could also negatively affect trade and the global economy, the Commission added.