The Government is expected to have extra flexibility to consider stimulus measures in next week's budget, thanks mainly to tax revenue holding up better than expected this year.
Conall Mac Coille, chief economist with Davy, said the Ministers for Finance and Public Expenditure will be aiming for a deficit that won't be an outlier compared to the rest of Europe, but the government will have room to introduce a 'stimulatory' budget.
"If you look at the deficit out-turn for 2020, it will be around 6% of GDP - others have it a little higher at 7% of GDP - but the bigger picture is that in the UK, they're looking at a deficit of almost 20% of GDP, so the government has a bit of flexibility with the deficit," he explained.
The rules regarding debt and deficit levels have been suspended by the European Commission for the duration of the pandemic.
The ECB plans to inject up to €750 billion into the euro zone economy through a range of measures in order to keep government borrowing costs low.
That allows the government some breathing space to continue to support the economy, but it's unlikely to be anything close to the 'giveaway budgets' that we've known in the past.
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Finance Minister Paschal Donohoe has already said there would be no changes to income tax, USC or PRSI.
"Media reports have focused on more infrastructure spending, maybe an expansion of the help-to-buy scheme, perhaps an extension of the wage subsidy scheme beyond March 2021 and maybe an extension of some of the measures to help businesses, giving them flexibility in terms of tax payments or grants to meet fixed costs," Conall Mac Coille said.
In terms of the amount of additional spending, Mr Mac Coille pointed out that, before policy changes, the deficit for 2021 was forecast to be around 4.5 to 5.5% of GDP.
"That certainly won't raise the heckles of bond investors," he said.
"There's room to be at the top end of that range so around 1% of GDP or about €3 billion."
In its latest quarterly economic bulletin published this morning, the Central Bank acknowledges that the rise in the deficit and debt ratios is both "warranted and necessary" and is affordable at this time.
However, it warns that a path to lower and more sustainable levels will eventually have to be taken.