The Economic and Social Research Institute has forecast that the Irish economy will grow by 0.9% next year, a downgrade from its previous prediction of 2.3% growth.
The institute said ongoing uncertainty over the euro area debt crisis means fiscal targets will become harder to achieve for all countries in the eurozone.
It said growth in Ireland's exports will not be enough to counterbalance weak domestic demand and the Government's austerity measures.
However, the ESRI added that Ireland should be able to continue to meet its fiscal targets in the near future, "but it will become harder to do so as the external environment becomes increasingly unfavourable".
It said without a decisive intervention at political level to end the crisis and boost growth, the eurozone economies will barely grow, making budgetary targets difficult if not impossible to achieve.
In its latest report, the ESRI says that Irish gross domestic product will increase by 2.2% this year, marking an upgrade from the September growth forecast of 1.8%.
No effect on Budget plans - Noonan
Minister for Finance Michael Noonan has said the ESRI report will have no bearing on plans for the Budget.
Speaking after a meeting of EU Finance Ministers in Brussels, Mr Noonan said the report also said that the deficit would be lower than expected at 8.3%, so "we won't have to make any changes".
He said the ESRI had marked up growth rates for 2011 and marked them down for 2012 so.
He said the Government was somewhere in the mid-range as far as forecasts went.
From that point of view, he said, "we are on solid ground".
Mr Noonan also said that the IMF "stood ready" to help in the eurozone debt crisis through bigger contributions from the organisation's members.