The Minister for Finance, Paschal Donohoe, has said the Government is now predicting a general government deficit of €21bn or 6% of national income for this year.
This compares to estimates earlier in the year of a shortfall of up to €30bn.
Next year the Government is predicting a deficit of €14.5bn if there are no policy changes announced in the Budget, he added.
That would be equivalent to 4% of GDP.
Mr Donohoe said the Government's pre-budget White Paper, which is due to be published later tonight, is based on the assumptions of economic decisions that have been made up to now and the current level of public health guidance.
So if either were to change, the deficit figures would go beyond those indicated today, he said.
Minister for Public Expenditure and Reform, Michael McGrath said Covid-19 will have a significant impact on spending next year.
While the Government is still finalising the assessments, Mr McGrath said €8-8.5bn of Covid spending will be required next year across health, education, social protection etc on the basis of a no changes to existing policies.
He said he believes the €3bn increase in health spending over last year already announced will be 'adequate' for this year. He indicated that no supplementary spending beyond this was being considered at this time.
He also said no final decision has been made on whether to pay a Christmas bonus to social welfare recipients this year as 'the Exchequer is in a very strained position'. He said he would confirm the position in relation to this with Minister Heath Humphreys next week.
The Minister for Finance confirmed in a response to a question that if 'further public health guidelines' were to be adopted, the current projected deficit €21bn 'is going to grow and grow and grow.'