Headline Insights
- Global energy price surge (Middle East conflict) drives higher inflation and slower growth.
- Ireland’s economy remains resilient but exposed to external shocks.
- Inflation revised up: 2.9% (2026), 2.6% (2027).
- Growth moderates: Modified Domestic Demand (MDD) 2.9% (2026), 2.5% (2027).
- Unemployment rising slightly toward 5%.
Economic Performance
- 2025: Strong investment and exports lifted MDD by 4.9%.
- 2026–27: Growth slows as inflation erodes real incomes.
- Exports: Pharma and ICT remain key drivers; volatility expected as stockpiles unwind.
- Investment: Construction, machinery, and R&D continue to expand.
Inflation & Prices
- Energy and services costs push inflation higher.
- Headline HICP: 2.9% (2026) → 2.6% (2027) → 1.9% (2028).
- Food and energy pressures re‑emerge; services inflation remains sticky.
Labour Market
- Employment growth easing: 2.2% (2025) → 1.9% (2026).
- Unemployment: 4.7% → 4.9% → 5.1%.
- Youth job‑finding rates weakening slightly.
Households & Savings
- Consumption growth slows to 1.9% (2026).
- Real disposable income squeezed by inflation.
- Savings rate remains high (~14%), above long‑run average.
Risks & Scenarios
- Downside risks dominate — energy price uncertainty.
- Adverse scenario: inflation >4%, growth down 0.5 pp annually.
- External environment fragile: euro area slowing, China decelerating, US resilient.
Policy Outlook
- Monetary: ECB holds rates steady; stance remains data‑dependent.
- Fiscal:
- Target supports to vulnerable households.
- Reduce reliance on volatile corporation tax.
- Broaden tax base (property, consumption).
- Maintain capital investment in housing, infrastructure, and climate transition.