The Irish economy could contract by 1.3% in the last three months of the year, as a result of the move to Level 5 restrictions for six weeks according to estimates.
Davy chief economist Conall MacCoille said because the level of activity remained impaired in many sectors before the new lockdown, this will limit the negative impact on Gross Domestic Product in the fourth quarter.
"That said, this exercise illustrates the key question of whether the lockdown lasts only six weeks or is repeated again in 2021," he wrote in a note to investors.
"Also, government supports now in place will help, but there is also a risk that the stressed financial circumstances of some firms could limit the rebound after the lockdown," he added.
GDP contracted by 2.1% in the first three months of the year and by 6.1% in the second quarter, which included several months of severe restrictions.
The Government has estimated that the imposition of Level 5 restrictions could lead to an additional 150,000 people losing their jobs and moving onto the Pandemic Unemployment Payment, at a cost of €1.5 billion to the economy.