He notes that the country will have to borrow €14bn next year just to stay afloat, but defended the Bank Guarantee Scheme, arguing that it won't cost the Government a cent.
In an interview carried in the latest edition of Hot Press magazine, Mr Cowen also reiterates his apology over the medical card fiasco.
"The Government has to paint this picture sufficiently vividly for people. Next year you are going to see an increase in unemployment -- it could be over 70,000 at least," he said.
Figures released yesterday by the Central Statistics Office already show that unemployment stands at an 11-year high, and Mr Cowen explained: "We'll be borrowing €13bn or €14bn next year.
"Our national debt will rise because of the fact that we have to borrow €8bn to invest in our capital programme -- but that's the right thing to do because there will be a return on that investment."
He added: "You have to recognise that the country next year, on day-to-day expenditure, will be spending €4,700m more than what's coming in, in taxes."
According to the Taoiseach "the meltdown" on Wall Street should be clear for all to see and its subsequent impact on Ireland is becoming more obvious every day.
He said: "This financial crisis is of a kind that hasn't been seen since the 1920s."
Mr Cowen described this year's economic developments as a "major shock" for the global system, adding: "Its impact is not yet fully known."
And he warned that if once-prosperous Iceland can find itself in serious financial problems, Irish people must be aware how serious things here could get.
"There's financial turmoil out there, from which we cannot go on thinking we are immune.
"There are some countries facing very serious problems -- look at what happened in Iceland and look at how the IMF had to provide a package for Hungry, which is a member of the European Union.
"The Korean economy is under severe pressure this week and its currency dropped 30pc. Every economy seems to be going into recession."
Speaking about the Bank Guarantee Scheme, Mr Cowen said: "The banks can use the reputation of Ireland as a means of getting access to funds on the international markets so as to keep business going here."
On the subject of the medical card controversy, which led to 15,000 pensioners protesting outside the Dail, the Taoiseach said he regretted the whole affair and wished to apologise.
"I want to take this opportunity to reiterate the Government's regret in causing any anxiety, as that was never our intention. I very much regret that, and I apologise for it."