The Economic and Social Research Institute has said the Irish economy should grow at the same modest level as last year.
In its latest quarterly economic commentary, the ESRI said that while austerity measures are having a damping effect on economic activity, the Government has few policy options to stimulate growth.
The Institute believes Irish GDP grew by 0.9% last year and expects a similar level of growth this year. That is more than the Troika expects, but less than the Government forecast.
It said the main uncertainty overhanging the performance of the Irish economy this year continues to be the international environment, particularly the eurozone.
Foreign trade will drive growth, with the ESRI expecting a further moderate decline in the domestic economy this year.
However, because the domestic economy is more important for job creation, the institute predicts a further decline in employment levels.
In its commentary, the ESRI challenged the view that austerity is not working, saying austerity measures are absolutely necessary to restore the public finances to sustainable levels.
It said given the scale of Government debt, there is no alternative.
ESRI Research Officer David Duffy said uncertainty in the international environment continued to be challenging but Irish exports were expected to perform well this year.
In a separate article in the quarterly review, ESRI researchers say that while Budget 2012 imposed greater percentage losses on those with low incomes, the cumulative austerity measures introduced since the start of the financial crisis have impacted most on the higher paid.
SIPTU President Jack O'Connor has criticised the ESRI for its view that austerity is working.
Mr O'Connor said: "How could any rational intelligent or independent economist suggest that austerity is working while simultaneously projecting a further fall in jobs?
"Today's report is a further example of the ESRI's sycophantic subservience to the bankrupt orthodoxy which is ruining the lives of millions of people across Europe."
