The Irish Fiscal Advisory Council has urged the Government to continue to support both the incomes of households and businesses in next month's Budget.

It says that fiscal adjustment, or balancing the books, should not happen before a recovery is well-entrenched.

In its pre-Budget statement, the Irish Fiscal Advisory Council - which acts as a watchdog on budgetary policy -describes the economy as being between a crisis and a recovery.

For this reason, it says, it is no time to switch off the huge supports being given through various schemes for business, wage subsidies and pandemic payments.

In fact, IFAC thinks the Government needs to go further.

It proposes a flexible stimulus fund to respond to the ups and downs of Covid-19 and a no-deal Brexit.

Yesterday the Minister for Finance indicated that a Recovery Fund would be announced in the Budget but gave no indication of its size.

IFAC also pointed to the potential weak points in the economy with the continuing strength of multinational exporters hiding a decline of 20% in the value of 'traditional' exports and a fall of over 16% in the value of non-computer services.

The reliance of the public finances on corporation tax is also likely to be even greater this year.

The chair of the Irish Fiscal Council has said that the economy has taken an exceptional hit as a result of the pandemic and while a recovery is happening the economy remains weak, with high unemployment.

Sebastian Barnes told Morning Ireland the Council is recommending that the Government should prioritise income support measures for firms and companies and continue to support sections of the economy badly impacted by the Covid-19 crisis in next month's Budget. 

The Council is recommending a multi-year stimulus package to run into 2022 and beyond.

Mr Barnes said that a precise figure had not been put forward but that an illustrative figure of €10 billion was included in the submission.

He said that in these exceptional circumstances it is "absolutely appropriate" the Government should continue to support the economy and avail of the good financing conditions on the market with low interest rates available.

He said there are risks that the Covid-19 crisis could get worse than expected and that there could be a hard Brexit - this requires that appropriate contingencies are in place, he said. 

Sebastian Barnes said investment is a good way to support the economy while bringing long term benefits. He suggested areas including housing and climate change could be supported by Government during this time. 

Mr Barnes said refinancing will have short term protection against movement in interest rates, but when the recovery happens it will be important to bring debt back to a safer level to prevent exposure to interest rates changes.