The Exchequer is expected to end 2006 with a budget deficit of just €208 million compared to the Government's original estimate of a €3 billion shortfall, a Reuters poll of economists found today.
Last month, the mid-range forecast from economists for Ireland's 2006 budget deficit was €458 million, but the Department of Finance has since revised its own estimate to a €626 million shortfall.
However, Thursday's poll showed that economists still think that is too cautious, with the median of 10 forecasts putting this year's budget deficit at €208 million - giving Minister for Finance Brian Cowen room for a pre-election giveaway.
Mr Cowen said earlier this month he would not get carried away in his next budget in December - the last before a general election due by the middle of next year.
"On the budgetary front, there is scope for a very generous budget, and despite Cowen's protestations, he is likely to inject at least €3 billion into the economy," said Friends First economist Jim Power.
"A 2 per cent cut in the top tax rate and the abolition of stamp duties for first-time buyers should form part of the overall package," he added.
However, others warned against over-zealous spending, pointing to Ireland's rising inflation rate.
Economists are forecasting consumer price inflation of 3.9 per cent in 2006, slightly lower than the 4 per cent forecast last month but still well above last year's 2.5 per cent rate.
The harmonised index of consumer prices (HICP), the measure used for Europe-wide comparisons, is seen at 2.7 per cent. Last month economists were forecasting 3 per cent HICP growth this year but the index surprisingly fell by 0.3 per cent month-on-month in September
"Annual CPI inflation rates are likely to continue to rise on the back of interest rates and some food prices," said Ibec economist David Croughan.
"Gas and electricity prices will continue to add to inflation in contrast to other energy prices. . . . A stimulatory budget would not be helpful to reducing service sector inflation."
Economists raised slightly their forecasts for economic growth this year, and now they expect gross domestic product growth of 5.6 per cent in 2006 compared with last month's estimate of a 5.5 per cent rise.