The think-tank said a crucial EU deficit target would be easily met by setting out a neutral Budget, without any extra measures beyond water charges.
But Professor John FitzGerald signalled the institute was not against income tax concessions, as long as the overall policy was prudent.
The assessment comes as the International Monetary Fund (IMF) more than doubled its growth forecast for Ireland this year to 3.6pc – one of the strongest IMF forecasts for any country. But the ESRI cautioned against any give-aways over the coming years, warning there should be a neutral budget for 2015, without any change to tax or spending, and for 2016.
The think-tank hiked its forecast for growth this year to 5pc – slightly more optimistic than the forecast from the Department of Finance of 4.7pc.
The ESRI predicted the country would be able to return to full employment earlier than the 2020 target set by the Government, and run a small budget surplus by 2016.
In its latest economic commentary, the ESRI said an investment programme would stimulate the economy.
This would be made up of about €400m from water charges and €100m from savings achieved under the Haddington Road agreement.
“This (investment programme) would help to consolidate growth while also tackling one of the most pressing economic and social policy concerns at this point, namely, the supply side of the residential property market,” said Kieran McQuinn, co-author of the commentary.
The ESRI said that if the Government opts to do nothing more in the Budget, other than introduce the water charges, the deficit could be reduced to 2.1pc of the value of the economy in 2015. The Government must come in below 3pc by the end of next year under EU rules. The ESRI forecasts GDP will rise 5pc this year and 5.3pc next year, with the improved projections driven by a better than expected trade performance, a pick up in investment levels and the strong tax take.
Unemployment will dip to 9.6pc next year, it said. Meanwhile, the IMF yesterday hiked its growth projections for the Irish economy to 3.6pc for this year from 1.7pc.
Article Source: http://tinyurl.com/kbwqb42