The state earlier this year was on track to amass a modest $11 million budget surplus.
But a May budget update released on Friday detailed a shocking turnaround in Tasmania's economic fortunes due to coronavirus, revealing the budget would be in deficit by $716 this financial year and $1 billion the year after.
Net debt is expected to increase at the end of June to $645.9 million, up from the anticipated figure of $284.5 million.
Net debt is estimated to grow to $2.34 billion by 2020-21.
The last time the state was in net debt was in 2003-04.
Gross state product - the measure of a state's economic output - was predicted to grow by 3 per cent in this year's budget.
Friday's update showed it would now likely decrease by 1.75 per cent. If this was to occur, this would be the first time gross state product had dropped since 2012-13 and would be the biggest decline since 1989-90.
Premier Peter Gutwein said Tasmania was the only state so far to produce a forensic analysis of its finances.
"The Treasury books paint a bleak picture, there's no other way of explaining it," he said.
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Mr Gutwein said reduced economic activity as a result of coronavirus had impacted government revenue and government expenditure was higher as the impacts of the pandemic were managed.
"The slowing national economy will have a significant impact on our GST revenue, which we expect to be written down by $310 million this current financial year and more than $357 million in 2020-21," he said.
"State taxation revenue will fall over this financial year, and next, by a total of $360 million."
This includes significant reductions in payroll tax ($93.5 million), conveyance duty ($58 million), land tax ($48.6 million), and motor tax ($40 million).
There is no optimism to be found around employment figures either.
"From leading jobs growth in March 2020, we now forecast 27,500 jobs lost by the end of June and an unemployment rate of 12.25 per cent," Mr Gutwein said.
Coronavirus: All the latest updates on COVID-19 for Tasmania
The figures do not reflect staff working reduced hours, people on JobKeeper, people stood down temporarily or people taking annual leave.
Mr Gutwein said he had asked Treasury to review the government's $3.7 billion program to determine which projects could be swiftly commenced.
"We're going to lay out the most aggressive construction program in Tasmania's history," he said.
Mr Gutwein said the department had not advised him on potential revenue-raising opportunities associated with new or increased taxes, levees, or charges.
He said the government had not considered cuts to the public sector.
Treasury will provide further economic updates in August and October.
The state budget is expected to be handed down on November 12.