Ratings agency Moody’s noted “significantly” increased public spending this year as it said the reduced 2016 deficit forecast in the budget does not fundamentally alter its credit assessment on Ireland.

Moody's initial comments on the budget came as Prof John McHale, chairman of the Irish Fiscal Advisory Council, pulled back from claims he made yesterday morning that Budget 2016 may break European fiscal rules.

At the same time, however, Prof McHale said there was no change to his fundamental assessment of the budget.

“Based on the beyond-budgeted spending for this year, the overall fiscal stance is too expansionary. That’s the main point I wanted to make – and did make – and that very much still stands,” he told The Irish Times.

Moody’s, which stands apart from rivals Standard & Poor’s (S&P) and Fitch by not having an A-rating on Irish debt, has indicated it will issue a formal consideration of the budget later this week. Neither S&P nor Fitch had any comment on the budget.

In response to questions, however, Moody’s senior vice-president Kathrin Muehlbronner said the package was in line with expectations.

“ Moody’s recently assigned a positive outlook to Ireland’s Baa1 long-term government bond rating, which reflects the marked improvement in the country’s credit fundamentals,” said Ms Muehlbronner.

“That said, Ireland’s public debt ratio remains very high at close to 100 per cent of GDP, and the recent improvements in key credit metrics will need to continue and be sustained for Ireland’s credit rating to improve further.

“We note that the Irish government aims to reduce the budget deficit next year to 1.2 per cent of GDP. Ireland’s fiscal track record has been strong and we believe that the target is eminently achievable.”