Minister for Finance Brian Cowen warned it would be unwise "to ignore the signs that are there for all to see" when he spoke in a debate on pre-budget estimates.
He said the main factors underpinning the downward economic revision this year would also prevail next year.
"The latest leading indicators of future housing output - for example, new house registrations and housing starts - have been negative for some time, and clearly point towards lower output for next year.
"This will have a negative impact on employment trends and lower employment growth is now likely for next year. This will lower the rate of personal consumption growth."
Mr Cowen said GDP growth was expected to be 3.25 per cent, which was not out of line with others publishing forecasts since the summer. "This forecast is based on a considered view of economic prospects, and is not slanted to achieve a purpose, political or otherwise, as some have mistakenly claimed."
Looking at the overall period 2008-2010, GDP growth was forecast to average 3.5 per cent.
"This level of growth is lower than we have experienced in recent years, and it will have implications for us all.
"For instance, lower levels of activity are assumed to result in some employment losses in the construction sector. As a result, the rate of employment growth is expected to slow to 1.25 per cent next year from an estimated 3.5 per cent this year.
"Consequently, unemployment is forecast to rise from 4.5 per cent this year to 5.5 per cent next year. In this regard, a provision for an increase of 10,000 in the live register has been made in the estimates for 2008."
Mr Cowen said that immigration was forecast to continue, albeit at a slower pace.
The slower pace of economic growth and less favourable labour market conditions were expected to result in a moderation in the rate of wage inflation. However, people should not lose sight of the fact that the State's overall growth performance was impressive by international standards.
Fine Gael finance spokesman Richard Bruton recalled that in the tight Nixon-Kennedy contest for the US presidency the turning point was the unshaven picture of Richard Nixon with the caption: "Would you buy a second-hand car from this man?" Many might now be thinking the same about Mr Cowen.
He said the Government had built its reputation for good economic management on the back of a debt-fuelled property boom. "Now that that has been stripped away, we are beginning to see the reality which has been concealed by the tax bonanza. It is the reality of boom squandered."
Labour spokeswoman Joan Burton said there had been different predictions about the performance of the economy. "Internationally, the IMF is honest enough to admit evidence of a significant slowdown and a confirmation of the credit crunch that has left the financial markets in sustained turmoil for months."
