The Economic and Social Research Institute has warned that 200,000 people may be forced to emigrate between now and 2015 if unemployment is not addressed.
The ESRI has also warned that the Government will have to take more than €7.5bn out of the economy if it is to eliminate the State's deficit by 2015.
In a report Recovery Scenarios for Ireland, the ESRI says the additional burden of the €25bn bailout of Anglo Irish Bank and Irish Nationwide will hinder growth.
The ESRI says the economy will improve but it is not sure when and to what extent.
It has drawn up two scenarios - an optimistic one, where GDP growth recovers to 4.6%, and a pessimistic one, where growth only reaches 3.2%.
In an ideal world, the international economy recovers, exports surge at home, competitiveness improves, banks resume lending by the end of this year, and the Government implements effective policies to tackle unemployment.
It would also proceed firmly with painful Budget adjustments of at least €7.5bn over the next four years.
In those circumstances, the deficit could fall to 2%, with unemployment plummeting to 4.8% by 2015.
However, if growth is slow, the ESRI forecasts a deficit of 4%, and unemployment remaining at over 7%.
It also warns the Government would have to cut more than the anticipated €7.5bn.
Speaking on RTÉ's Morning Ireland, Professor John FitzGerald of the ESRI said the economy could start to grow from 2012, but only if there were no unforeseen factors.
He said a mixture of spending and tax hikes would be needed in order to bring in revenue, but that bringing borrowing under control should be the priority.
