The forecast also predicts inflation will average 2.4% during 2013 and 2.3% in 2014.
The broader picture remains one of persistent economic weakness with GDP at roughly at the same level as two years ago and still 3% below its 2008 peak.
GDP is not expected to regain its 2008 peak until 2015, but real per capita GDP will not recover until 2018.
At the end of 2012 the economy had grown by just ½% from Q3 2010 levels which represents the slowest post-recession recovery in output in the past century.
The poor performance of overall output is in stark contrast to the labour market where employment is up 1% and average hours worked have increased by 0.7% when compared to Q3 2010.
The forecast anticipates unemployment will stabilise at about 8% during 2013 before beginning a sustained fall in 2015.
The NIESR said: “Recovery depends upon a resumption of consumer spending, while balanced recovery also requires the resumption of corporate spending and a pick-up in export growth.
“It remains our view that such a recovery would best be supported by a significant increase in public sector net investment with looser fiscal policy in the short term while demand remains weak and radical reform of the financial sector to support lending to the real economy.
“Rising employment and falling unemployment rates are positive developments, but this poor productivity performance is worrying in its persistence.”
