If the Irish economy was not already buckling under the strain of the collapse of the Celtic Tiger, the findings of the latest In International Monetary Fund (IMF) will bend the bow further.

The report states the the Irish economy will shrivel by 13.5% and the unemployment rate will hit 15%.  Among the other projections included in the report were that bank losses could top €35 billion by 2010 and the public service wage bill would have to be reduced. .

The executive summary of the International Monetary Fund (IMF) report started off on a bright note:

“Given its serious internal imbalances, Ireland was especially vulnerable to the recent global shocks. Overextension in construction and financial intermediation, along with loss of international competitiveness has meant that the impact will be sizeable.”

The next few lines saw Ireland top a list for all the wrong reasons.

“Cumulatively, GDP is projected to contract by 13½ percent through 2010, the largest among advanced economies. Thereafter, as the present dislocations gradually correct themselves, only a modestly-paced recovery is foreseen. The incipient decline in wages will need to be sustained to help redress Ireland’s cost disadvantage.”

The IMF said that that the establishment of the National Asset Management Agency (NAMA) was a good thing to separate the good assets from the bad, saying:

“The authorities’ decision, announced in the April supplementary budget, to establish the National Asset Management Agency (NAMA), marks a significant step in beginning the process of bank restructuring.”

However, severe cuts in expenditure will be necessary to redress the situation the Irish economy now faces.

“Expenditure reduction, as distinct from raising taxes, is the superior approach to fiscal consolidation but, unless carefully managed and prioritised, risks hurting the most vulnerable,” says the IMF in the report.

 “I share their broad assessment,” Finance Minister Brian Lenihan told RTE Radio show Morning Ireland. “We did overheat the economy. I have always accepted that and  I made that clear in my last budget speech.”

The Government has bowed to opposition party pressure and will hold a Dail debate on the IMF report today.