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Irish Economy and Public Finances

October 2026

  • Budget 2027: Macroeconomic outlook

    • Budget 2027, which includes the Government’s updated economic and fiscal forecasts, shows an Irish economy that has demonstrated resilient growth this year, despite continued uncertainty in the global environment. Following disruption last year from a changing trade and tariff landscape, this year has seen risks from increased energy prices owing to the prolonged conflict in the Middle East.

      Over the course of this year, the Irish macroeconomy has maintained positive momentum. As usual, we look at modified figures in order to strip some of the effects of multinational activities and capture the underlying domestic economy. Modified Domestic Demand (MDD) grew by 3.1% year-on-year in the first half of 2026, with Budget 2027 forecasting growth of 3.7% for 2026 overall, an upward revision of 1.6 percentage points from the Annual Progress Report (APR) forecast. Looking forward, MDD is forecast to moderate to 3.0% and 3.3% in 2027 and 2028, respectively.

      As in past years, domestic growth has been underpinned by strong consumption and a robust labour market which have supported modest wage gains. Budget 2027 projects personal consumption growth of 2.9% this year, an upward revision of 0.9 percentage points from the spring forecasts. Modified investment grew significantly in 2025 (up by 11.3%) and while this is anticipated to moderate to 5.1% this year, investment remains a large contributor to domestic economic growth. While this in part reflects increased government infrastructure investment, it is also influenced by spending related to data centres and semiconductor manufacturing equipment. Although modified investment focuses on spending that contributes to the domestic economy, these projects suggest that it can nevertheless be associated with the activities of multinationals.

      The labour market is expected to remain close to full employment, with the unemployment rate projected to be 5.0% for the next two years. Employment growth has seen more mixed signals. Budget 2027 forecasts survey-based employment to grow by just 0.8% overall this year (from Budget 2027), while administrative payroll data showed a 2.4% increase in the number of employees year-on-year in the first half of 2026. This divergence has complicated interpretations of the Irish labour market. The tiebreaker in this analysis is that tax receipts in 2026 have been strong indicating the payroll data is telling a story closer to reality.

      Inflation remains a primary risk going forward. HICP inflation is forecast to average 3.3% in 2026 and 3.0% in 2027, compared with 2.1% in 2025. Unsurprisingly, energy is the main contributor to increased prices.. A more detailed look at the effect of the energy price shock on inflation follows, but despite these headwinds Ireland is anticipated to show resilient growth this year and into 2027.

  • Looking forward: economic resilience in light of increased global uncertainty

    • In recent years, the Irish economy has remained resilient despite a more challenging international environment. While Budget 2027 presents an economy that continues to grow at a solid pace, it also acknowledged the outlook is dependent on external developments, particularly the sustained impact of volatility in global energy markets. Looking forward to the end of 2026 and into 2027, this presents a key risk factor for Ireland and may compound an already complex global environment.

      As a net energy importer that continues to rely on imported fossil fuels to meet domestic energy needs, Ireland is vulnerable to increased global energy prices. Energy accounts for nearly 10% of the HICP basket, and the effect of higher input prices and reduced real incomes for households could result in second order effects across the economy.

      To provide a closer look at these potential impacts, Budget 2027 includes a scenario analysis centred on the transmission of higher energy prices throughout the economy. Under the adverse scenario, disruptions to oil and gas markets are assumed to be more prolonged than futures suggest, resulting in longer-term increases in energy prices. Oil prices reach $110 per barrel before declining over the period. In this scenario, inflation is forecast to reach 3.75% by 2027. MDD growth would subsequently fall half a percentage point relative to the baseline, to 2.5% in 2027. In the severe scenario, disruptions are assumed to be more prolonged and more severe, with oil prices reaching $150 per barrel. Under this scenario, inflation is projected to rise to 5.0% in 2027. The impact of elevated prices is forecast to result in MDD growth of just 1.5% in 2027, compared to 3.0% in the baseline. Though these scenarios would undoubtedly represent a significant shock in the medium term, it’s worth noting that even under the most severe scenario the Irish economy is forecast to grow modestly. While geopolitical uncertainty and energy market volatility remain considerable risk factors, the Irish macroeconomy has demonstrated consistent resilience in the face of these external developments.

      Table 1: Budget 2027 Macro Forecasts

      2025

      2026

      2027

      2028

      2029

      2030

      Real GDP (% change)

      8.0

      -0.7

      3.8

      3.4

      3.3

      3.2

      Nominal GDP (% change)

      7.2

      1.2

      6.6

      5.9

      5.8

      5.6

      Real GNI* (% change)

      4.7

      3.1

      3.5

      2.4

      2.4

      2.4

      Real MDD (% change)

      4.7

      3.7

      3.0

      3.3

      3.1

      2.9

      Personal consumption (% change)

      2.6

      2.9

      2.4

      2.4

      2.3

      2.3

      Modified investment (% change)

      11.3

      5.1

      4.4

      5.8

      5.5

      4.8

      HICP (% change)

      2.1

      3.3

      3.0

      2.1

      2.0

      2.1

      Core HICP (% change)*

      2.2

      2.7

      2.9

      2.4

      2.3

      2.2

      Employment (% change)

      2.2

      0.8

      1.8

      1.2

      1.1

      1.0

      Unemployment (per cent)

      4.7

      5.0

      5.0

      5.0

      5.1

      5.1

      * Core HICP excludes energy and unprocessed foods

  • Budget 2027: Fiscal outlook

    • Ireland’s headline fiscal position remains strong by European standards. The General Government Balance (GGB) was in surplus by €10.7 billion (3.2% GNI*) last year, though this is forecast to drop to €6.7 billion (1.9% of GNI*) in 2026. Looking forward, the GGB is expected to be in a more modest surplus, averaging 0.9% of GNI* per year in 2028 to 2030. When compared to an average of 3.0% of GNI* over the past five years, this represents a notable change in trend.

      General Government (GG) Revenues are expected to remain strong, with little change from the APR estimates. VAT and income tax receipts are expected to grow by 6.7% and 7.4% this year, respectively. As anticipated, excise duty receipts are down this year in light of the Government’s policy measures to help mitigate the impact of the energy price shock.

      As has been the case for several years, Ireland’s fiscal position is significantly supported by strong corporation tax (CT) receipts. CT receipts are forecast at €34.1 billion in 2026 and €39.1 billion in 2027, though the increase next year partly reflects the timing of payments under the OECD Pillar II reforms. Taken together, CT receipts over 2026 and 2027 are only slightly above the amount projected in the APR.

      The main fiscal vulnerability remains the concentration of corporation tax revenue, as the Irish Fiscal Advisory Council estimates that nearly half of corporation tax comes from only three large multinational companies. Excluding receipts considered ‘potentially transitory’, the underlying General Government Balance is estimated to be in deficit by €12.1 billion in 2026 and €13.4 billion in 2027. This reinforces the much-discussed concentration risk in the Irish tax base and demonstrates a vulnerability to any change in corporate profit or restructuring.

      The downward revision in the 2026 surplus from the €9.2 billion forecast in the spring, primarily reflects higher than expected expenditures. GG expenditure is anticipated to be €146.7 billion in 2026, or 9.3% growth on 2025. This suggests spending growth is currently outpacing the potential nominal growth of the economy as noted by the Irish Fiscal Advisory Council in their post-Budget assessment.

      Increased capital spending (growth of 18% in 2026) drives some of this increase, but growth in current spending is also playing a role. More structural factors have also contributed to expenditure growth in recent years. Inflation, demographic growth and the need to address an existing infrastructure gap have increased both the demand for public services as well as the cost of sustaining existing service provision. However, the expenditure picture appears more moderate when set against the growth of the domestic economy. GG expenditure is projected at 41.3% of GNI* in 2026 and 41.2% in 2027, a ratio that has remained relatively stable in the post-pandemic period and is below the euro area average.

      Debt dynamics remain favourable in the near term. Gross general government debt is forecast at €207.9 billion (58.5% of GNI*) in 2026 and €214.0 billion (56.4% of GNI*) in 2027. Once the State’s large cash balances and growing financial assets are taken into account, net debt (gross debt less EDP financial assets) is lower again and stood at 41% of GNI* at end 2025, underscoring the improvement in Ireland’s sovereign balance sheet.

      The Future Ireland Fund (FIF) and Infrastructure, Climate and Nature Fund (ICNF) play a role in strengthening these important fiscal buffers. The aim is to ring-fence strong, but volatile corporate tax receipts to help alleviate spending pressures in the future. The FIF will be used to meet Exchequer costs from 2041 onwards, such as an ageing population and the digital and climate transitions. The ICNF is more countercyclical in nature with a mandate to support State expenditure (i) where there is a significant deterioration in the economic or fiscal position of the State, and (ii) on designated environmental projects from the years 2026 to 2030. At end Q2 2026, there was approximately €20 billion across the two funds. This would grow to above €30bn by end 2027 if planned transfers take place.

      Table 2: Budget 2027 Fiscal Forecasts

      2025

      2026

      2027

      2028

      2029

      2030

      GGB (€bn)

      10.7

      6.7

      9.5

      4.7

      0.9

      5.7

      GGB (% GNI*)

      3.2

      1.9

      2.5

      1.2

      0.2

      1.3

      Gross Debt (€bn)

      209.9

      207.9

      214.0

      225.3

      236.4

      243.2

      Gross Debt Ratio (% GNI*)

      62.9

      58.5

      56.4

      56.3

      56.2

      54.9

      Gross Debt to GG Revenue (per cent)

      145

      136

      129

      130

      131

      126

      Effective Interest Rate (per cent)

      1.4

      1.5

      1.9

      2.2

      2.5

      2.7