(Corrects first paragraph to show that the full-year GDP contraction was the worst on record not the worst since 1983)
* Q4 GDP shrinks 7.5 percent year-on-year
* Contraction exceeds even most pessimistic forecasts
* 2008 economic performance the worst in 25 years (Adds detail, comment)
DUBLIN, March 26 (Reuters) - Ireland's economy plunged deeper into recession in the final quarter of 2008 with the worst ever full-year performance, setting the stage for an even bleaker 2009 than originally feared.
Gross domestic product (GDP) fell 7.5 percent from the same period a year ago, far worse than even the most pessimistic forecast in a Reuters poll, as consumers and businesses put the brakes down hard on spending.
"We have now moved into 2009 with even stronger headwinds than we thought," said Dan McLaughlin, chief economist at Bank of Ireland.
"You'll probably see further downward revisions (in 2009 consensus forecasts) on the back of this."
GDP fell 2.3 percent for the whole of 2008, data from the Central Statistics Office showed on Thursday -- far lower than the 1.5 percent decline forecast in a Reuters poll and the weakest level since 1983.
Economists had forecast fourth quarter GDP would drop by 2.9 percent. The lowest estimate in the Reuters poll was for a fall of 6.1 percent.
The government has already downgraded its forecast for this year's contraction to 6.5 percent from 4.5 percent, already predicted to be the worst recession on record as the former "Celtic Tiger" economy suffers from the double whammy of a global recession and a collapsing local property bubble.
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.
Gross National Product (GNP) fell 6.7 percent in the fourth quarter from a year ago, worse than expectations for a 3.9 percent fall.
GNP is the government's favoured measure of the domestic economy because it excludes profits earned by multinational companies which have a big presence in Ireland. (Reporting by Dublin bureau, editing by Andy Bruce)