The Irish government revised upwards its 2020 economic forecast on Tuesday, predicting the impact of coronavirus on gross domestic product will be much less severe than anticipated.
Finance Minister Paschal Donohoe released a pre-budget forecast predicting a 2.5 percent fall in GDP this year.
In April -- the Republic's first full month of Covid-19 lockdown -- Donohoe had predicted that contraction would reach 10.5 percent.
In a statement Donohoe said the new headline figure "is less severe than envisaged in the spring" because it "reflects the contribution to GDP from parts of the multinational sector".
During the pandemic the Republic has enjoyed robust performance in the export sector, notably pharmaceuticals, the department of finance said.
Donohoe's figures -- which will underpin Ireland's budget announcement on October 13 -- predict the nation will have an annual average unemployment rate of 15.9 percent this year, more than three times the 2019 figure.
They also predict a recovery of just 1.4 percent in GDP next year, on the assumption Ireland will be reeling from the dual shocks of a disorderly Brexit and the coronavirus fallout.
Britain and the EU are currently trying to thrash out an agreement to regulate their trade after a post-Brexit transition period expires at the end of the year.
If the talks fail, Ireland stands to suffer massive disruption with its closest trading partner as Britain reverts to World Trade Organization terms.
The GDP bounceback will be three percentage points stronger next year if London and Brussels do manage to clinch a deal, the Irish forecast said.