The Government's "mishandling of the property market" is one of the main reasons for the economic downturn, Labour leader Eamon Gilmore claimed today.
Mr Gilmore was commenting on the latest Economic and Social Research Institute (ESRI) quarterly commentary, which predicted growth in the Irish economy in 2008 would be slower than in any year since 1992.
He suggested the slowdown was due to a number of factors, not the least of which was the Government's mismanagement of the residential housing market.
"Housing output is expected to fall by a further 20 per cent next year, as a result of the overheating of the property market which the Government refused to address," he said.
The ESRI suggested low growth will result in almost no change in the numbers at work next year and a rise in the unemployment rate to 130,000, its highest level for a decade.
Reflecting the weakening in the building industry, the number at work in the construction sector next year is forecast to fall by 20,000.
"It is now urgent that the Government put in place appropriate programmes to retrain workers as they lose their jobs. This needs to be done now, rather than ignoring the problem as it develops," the Labour leader said.
"If we are to prevent unemployment rising to 6 per cent or above, appropriate labour market policies are urgently required," he added.
The ESRI has cut its forecast for a third time in five months. GDP growth will slow to 2.3 per cent in 2008 from 4.8 per cent this year, the ESRI said.
It forecast expansion of 2.7 per cent in September, and before that 3.7 per cent and 3.9 per cent.
The Irish economy has outperformed the rest of Europe over the past decade, driven by exports and construction. That pace is easing, however, as higher borrowing costs hit the country's property boom, curbing home building.
The ESRI reduced its forecast for the number of new homes to be built in 2008 by 15 per cent to 55,000. The slowdown in home building continues to place a drag on economic growth, the ESRI said.
"We expect overall declines in construction in both 2007 and 2008, with the declines being particularly severe in 2008. Given that an adjustment of this magnitude would eliminate the overvaluation of houses, we expect house prices to stabilise during 2008," the ESRI said.