The Republic of Ireland's economy is forecast to contract 0.5% this year, before rebounding to record 2.5% growth next year by the country's leading economic think tank.
The Economic and Social Research Institute also does not expect big improvements in the country's labor market in the next two years, with the unemployment rate forecast to average 13.75% this year before moderating slightly to 13% in 2011.
ESRI does not believe the Irish government's expensive bank rescue will seriously danger the solvency of the state.
It estimated the recapitalization needs of the Irish banks to be at least EUR 33 billion, assuming that the state investment in the Anglo Irish Bank ultimately amounts to EUR 22 billion.
"While this will be a large addition to the national debt it is manageable and in no way threatens the solvency of the state," the think tank said.
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