The Department of Finance has told an Oireachtas Committee that it expects the economy to grow by 1.8% next year.

It said Gross National Product will be 1% higher by the end of 2013 and 1.4% higher next year.

Meanwhile it has predicted employment will grow by 1.6% this year and 1.4% in 2014, with unemployment dropping to 12.6% next year.

The forecast has already been submitted to the Fiscal Advisory Council, which has formally endorsed them as part of the Budget process.

European Commission vice President Olli Rehn has also said that the Government's Budget plans are a "sound basis" for correcting the public finances.

In a statement, Mr Rehn said that the commission had "taken note of... announcements regarding the draft Budget for 2014.

"Our preliminary assessment is that it provides a sound basis for taking forward the necessary fiscal consolidation in Ireland and paving the way for a successful programme exit."

He said that the commission would make a final assessment of the Budget as part of its 12th review of Ireland’s bailout programme.

Earlier, Minister for Finance Michael Noonan said €2.5 billion would be taken out of the economy in Budget 2014 and not the projected €3.1 billion.

Speaking on his way into Cabinet this morning, Mr Noonan said that resurgence in the economy will make up the rest.

Minister Noonan confirmed last week that the Budget adjustment would be "somewhat less" than the €3.1 billion agreed with the Troika.

He said the country would still beat its budget deficit target of 5.1% of GDP.

"We can achieve our targets by not going the full way to €3.1 billion because there are other savings in the system. If you strip those extra savings out, it comes in slightly ahead of €2.5 billion," Mr Noonan said today.

The parameters and strategy of next week's Budget will be put to Cabinet today by the finance and public reform ministers, according to Brendan Howlin today.

The Minister said this was based on the most recent data available and discussions with the Troika.

Meanwhile, Education Minister Ruairi Quinn said today that the Government realises that "everyone is suffering".

He said the Government would try to "minimise" this in the Budget, while also balancing the need not to leave a debt mountain for future generations.

The Minister for Energy, Communications and National Resources has said the adjustment of €2.5 billion in next week's Budget meant there would be €600m less hardship visited on the public that was already suffering for too long.

The fact that it had been approved by the Troika was something to be celebrated, the Minister added.

Mr Rabbitte declined to discuss the detail of next week's Budget, but confirmed the money would not be made up from the proceeds from the sale of ESB power stations as the proceeds from any sale would not come through until next year.