Ireland’s economy slipped deeper into recession in the fourth quarter of 2008 with the worst full-year performance on record according to official data on Thursday.

Ireland’s Gross Domestic Product declined by 7.5 per cent year-on-year in the final quarter of 2008, as consumer spending plunged and industrial output declined steeply. The figures, from the Central Statistics Office, revelaed how Ireland’s economy contracted by 2.3 per cent overall in 2008.

The rapidly deteriorating economy has sent tax revenues nose-diving and the government is set to hike taxes and slash spending on April 7, in its second emergency budget in six months.

Ireland is among the weakest members of the single currency zone, with premiums on its debt over the relatively safe and favoured German bunds reaching record levels, indicative of the strains developing within the euro area.

The country, which experience a prolonged period of double-digit growth in the 1990s, is now suffering deflation, with prices falling 1.7 per cent on a 12-month basis after a drop of 0.1 per cent in January.

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