The Economic and Social Research Institute has said the economy will grow strongly next year, despite the fall in the value of goods exports due to some pharmaceutical products coming out of patent protection.

It said the impact of the "patent cliff" is mainly felt in the profits of US multinationals, not the Irish economy.

The ESRI pointed to employment growth and falling numbers on the Live Register as evidence that the real economy is set for higher growth than suggested by the headline figures.

The ESRI expects GDP growth of just 0.5% this year. The Department of Finance now expects an even lower number at just 0.2%.

Because pharmaceuticals and chemicals are Ireland's biggest export, the impact on the national accounts is quite large.

But the ESRI said this is masking a more positive trend in the economy.

It said the growth in employment recorded this year, which was confirmed by increases in income tax revenue, points to a growing economy.

It said GNP, which strips out the effect of foreign multinationals, could grow by 2% this year, which is double its previous estimate and it could rise to 2.7% next year.

This depends on the euro area returning to sustained growth, something that is not yet established.

Elsewhere, Taoiseach Enda Kenny has said the Budget on Tuesday will be a difficult one, but it will be a stepping stone to exiting the bailout.

Speaking at an IMI Management conference in Dublin, Enda Kenny said it will send out an "international flare", saying that here is a country emerging from its difficulties.

Mr Kenny said there are three Budgets left in the lifetime of this Government. The latter two will be approaching normality in terms of budgetary strategy, he added.

A Fine Gael Parliamentary meeting is due to start at 5.30pm, when the Budget and recent Seanad referendum are expected to be raised.

A Labour parliamentary party meeting this afternoon has been described as "frank".

The Government's decision to take out €2.5 billion in the Budget was broadly welcomed, but Tánaiste Eamon Gilmore told the party that a tough Budget still lay ahead.

Further briefings with Labour backbenchers are due this evening from various departments, including education.