The Institute believes that the number of new jobs created will be at its lowest level for 17 years.
It also said it expects the decline in overall building and construction activity to be particularly severely next year, and as a result, moderation in wage growth would be particularly welcome.
The ESRI has become significantly more pessimistic about the country's economic prospects for next year.
It also expects overall economic growth to be at its lowest level since 1992.
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It now says the decline in house building will be more substantial than expected, consumer confidence and spending will be lower, and the economy will be affected by a slowdown in Government spending as a result of the budget.
The result will be an economic growth of just 2.3% in 2008. That is just half as strong as this year, and will also be the slowest rate of Irish economic expansion for 16 years.
Employment prospects will suffer according to the ESRI with just 8,000 net new jobs next year.
The Institute's latest Quarterly Economic Commentary points out that service sector employment prospects remain good, with about 28,000 new service positions likely to open up.
Against this, however, the forecast suggests that about 20,000 jobs in construction and industry will be wiped out.
The impact will be higher unemployment, with 28,000 extra expected to be added to the dole queues.
The level of net immigration is also expected to fall by two thirds, according to the report.
(BMcC)
