The Economic and Social Research Institute has said the Irish economy will grow by about 5% this year and next year, and has called for a neutral Budget.
Because of the strong growth, it said the budget deficit will fall to just over 2% next year with a neutral budget.
A fiscally-neutral budget, one that does not increase the level of tax or cut spending, is described by the ESRI as the optimal policy for next week's Budget.
In its latest economic commentary, the institute said growth has picked up much more than expected earlier in the year, and so a large Budget adjustment is no longer needed to meet deficit targets.
It has forecast GNP and GDP growth of around 5% for this year and next, and said unemployment could fall to just over 9.5% next year.
It said it believes the Government will have about €500m in extra money next year for consumption or investment, and suggested the Government invest it in building social housing.
It said this would boost jobs and economic growth and help address a social need.
Speaking on RTÉ's Morning Ireland, the ESRI's Kieran McQuinn said housing supply is a big concern at the moment and if social housing is properly executed, it would have a positive effect on the general supply in the market.
He said: "I think the main concern in the housing market and I think this is something that everyone agrees with - is supply.
"That is the big concern. I think that is one of the reasons why we suggested the stimulus in terms of social housing because we believe if properly constructed it could also have the positive spillover effect of increasing supply generally within the market.
"I think that's what the housing market needs more than anything at this stage is increase in supply."
