The ESRI’s Quarterly Economic Commentary (QEC), Spring 2026 provides a detailed assessment of Ireland’s economic performance in 2025 and the outlook for 2026–2027. The report is shaped heavily by the emerging Iran–Middle East crisis, which has triggered a sharp rise in global energy prices and introduced significant uncertainty into the international economic environment.
1. International Context: Energy Shock Dominates
The global economy had already been navigating trade tensions and tariff uncertainty. The outbreak of conflict in Iran has now added a major energy‑price shock, with oil and gas futures indicating prices 40% higher in 2026 and 25% higher in 2027 than previously expected.
The ESRI notes:
“It is already clear that energy prices have risen sharply and that higher prices are likely to persist for some time…”
This shock is expected to push inflation higher across advanced economies and dampen investment and consumption.
2. Irish Economic Performance in 2025
Despite global headwinds, Ireland recorded strong growth in 2025:
- GDP grew by 12.3%, driven by a surge in goods exports—especially pharmaceuticals.
- Modified Domestic Demand (MDD), the ESRI’s preferred measure of underlying activity, grew 4.9%.
- Employment increased by 56,700, with unemployment remaining low at 4.4%.
However, some of this export strength was distorted by pre‑tariff stockpiling, particularly in pharma shipments to the US.
3. Outlook for 2026–2027
The ESRI expects growth to continue but at a slower pace:
Growth Forecasts
- MDD:
- 2026: 2.1%
- 2027: 2.8%
- GDP:
- 2026: 1.0%
- 2027: 5.5%
Inflation
Inflation projections have been revised sharply upward due to the energy shock:
“We now expect [CPI inflation] to be 3.2% in 2026 and 2.7% in 2027.”
4. Output Rising but Still Below Target
Housing completions increased to 36,248 units in 2025, up from 30,000 in 2024.
However, Ireland remains far from the 50,000 annual completions required to meet national targets.
Forward indicators—planning permissions and commencements—show no clear upward momentum, leading the ESRI to forecast:
- 37,400 completions in 2026
- 38,000 in 2027
The report warns that rising construction costs from the energy shock could further constrain supply.
5. Labour Market: Strong but Signs of Softening
- Unemployment remains low at 4.6% (early 2026).
- Youth unemployment shows a possible uptick, though the ESRI cautions that more data is needed.
- Employment in ICT has fallen from 190,000 to 175,000, driven mainly by declines in female employment.
Public‑sector vacancies have surged, now exceeding market‑sector vacancies for the first time.
6. Public Finances: Surpluses but Significant Risks
Ireland recorded a €3.8bn Exchequer surplus in 2025 (excluding Apple‑related receipts).
However, the ESRI reiterates concerns about:
- Heavy reliance on corporation tax, with three firms accounting for almost half of receipts.
- Windfall nature of much of this revenue.
- Persistent spending overruns.
The Medium‑Term Fiscal Plan sets expenditure ceilings to 2030, but the ESRI questions whether these will effectively constrain spending.
7. Policy Recommendations
The ESRI highlights several priorities:
A. Responding to the Energy Shock
The report strongly advises against cutting indirect energy taxes, noting:
“Flat‑rated energy credits are better targeted… but welfare changes are the most effective means” of protecting vulnerable households.
B. Infrastructure Prioritisation
Ireland faces simultaneous demands for:
- Housing
- Transport
- Energy infrastructure
- Climate‑related retrofitting
The ESRI warns that attempting to deliver everything at once risks capacity bottlenecks and inflation.
C. Domestic Enterprise Policy
Tariff uncertainty remains unresolved. Strengthening the domestic SME base is essential for resilience.
8. Special Article: Residential Heat Decarbonisation
A major accompanying article reviews Ireland’s progress toward 2030 heating targets:
- Only 11.5% of deep retrofit targets achieved
- Only 3.5% of heat pump targets achieved
- District heating far behind schedule
The authors conclude that Ireland is materially off‑track, and that BER‑based energy savings may overstate actual decarbonisation.
9. Research Note: The Irish Economy in the 2020s
This note highlights:
- Strong national income growth since 2019
- A significant contribution from windfall corporation tax
- A larger‑than‑expected role for the domestic professional services sector
- Ireland’s rapid convergence toward US living‑standard levels (NNI per capita)
Overall Conclusion
The Spring 2026 QEC paints a picture of an economy that remains fundamentally strong but is entering a period of heightened uncertainty. The energy shock, housing constraints, and reliance on volatile tax revenues pose real risks. The ESRI calls for targeted supports, fiscal discipline, and strategic prioritisation of infrastructure and climate investments.