The Economic and Social Research Institute has downgraded its outlook for the economy because of the threat posed by a hard Brexit.
In its latest commentary, the ESRI said it now expected the economy to expand by 3.5% next year, down from its earlier projection of 3.8%.
The uncertainty about a Donald Trump presidency in the US also prompted the think tank to trim its projection for economic growth for 2017.
However, Ireland will still be one of the fastest growing European countries next year.
In its latest report, the ESRI also said the State will collect more in taxes than it will spend next year. This will be the first time Ireland will have run a surplus in a decade.
That is an impressive performance given the crash in the public finances after the recession, the ESRI stated.
It also predicted that unemployment will fall to 7% next year and wages should grow by 2.3%.
The ESRI noted that the building and construction sector has picked up in recent quarters and should continue to grow into the New Year, resulting in approximately 17,500 housing completions in 2017.
The author of today's report, Kieran McQuinn, said that the outcome of the Brexit referendum was the most significant international development for the Irish economy in 2016.
"It is increasingly apparent at this stage that it may take some time before the necessary trade arrangements are concluded. Until that happens, variables such as exchange rates, stock market returns, producer and consumer sentiment may continue to display heightened volatility," Mr McQuinn said.
"This, inevitably, impacts on our assessment of the trade performance of the Irish economy," he added.
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