About the NTMA
Business Areas

Irish Economy and Public Finances

May 2026

  • Setting the scene: Resilient economic growth in the Irish economy despite external risks

    • The Irish economy entered 2026 with some momentum despite last year’s uncertain trade environment and is relatively well positioned to face recent risks to energy prices. At this time last year, the main external risk facing the Irish economy was from a changing trade landscape globally and specifically US tariffs. As it stands, the EU-US Framework Agreement outlines a 15% baseline tariff, with notable exceptions for pharmaceutical goods relevant for Ireland. As such, the resulting effective tariff rate faced by Ireland has been much lower relative to European peers.

      Over the course of the year, the Irish macroeconomy has demonstrated resilience. As usual, we look at modified figures in order to strip some of the effects of multinational’s activities and capture the underlying activity of the domestic economy. Modified Domestic Demand (MDD) grew by 4.9% in 2025, above the Budget 2026 forecast of 3.3% growth. As in the past, this was underpinned by strong consumption growth (2.9% in 2025) and a robust labour market. Notably, there was also significant growth in modified investment, which was up 10.9% year on year. Growth in Building and Construction played a role, driven by new dwelling completions. But more notable was growth in Intangible Assets and Machinery & Equipment, likely due to investments in data centres in the second half of 2026.

      Ireland’s labour market remained at essentially full employment in 2025, with the unemployment rate between 4.0-5.0%. Total employment increased by 2.2% on average in 2025, although there was sectoral variation including some weakness in Information & Communications and strong growth in Construction and Transportation & Storage.

      If we return to the impact of tariffs, the primary impact on the Irish economy in 2025 was a sharp increase in goods exports to the US, driven by both frontloading in anticipation of trade disruptions and a substantial underlying rise in pharmaceutical exports. Most of the increase in Ireland’s pharma exports to the US result from a spike in the production of hormone products (notably GLP-1s), reflecting the global demand for weight-loss drugs. The resulting impact on Gross Domestic Product (GDP) was 12.3% growth in 2025, ahead of the 10.8% growth forecast by Budget 2026.

      Turning to the economic story thus far in 2026, the focus has shifted to the potential impact of the conflict in Iran on global growth and subsequent increases in energy prices. Disruptions to the flows of oil and natural gas through the Gulf have pushed global energy prices higher, with oil averaging around $110 per barrel for Brent crude in the period since the conflict began. Oil and natural gas account for nearly 80% of Ireland’s national energy supply. Disruptions to energy markets remain an external risk to economic growth in 2026.

      So far, Ireland has primarily seen the impact of the conflict in the latest inflation figures, with headline HICP at 3.6% in March 2026. The impact of the 15.5% jump in energy prices is apparent through increases in electricity & gas prices (12.9%) and transport fuels (10.6%).

  • Annual Progress Report 2026: Macroeconomic outlook

    • The Department of Finance’s Annual Progress Report (APR) arrives against a backdrop of global uncertainty. Published in April, the APR provides an update to the official macroeconomic and fiscal forecasts for Ireland and has incorporated the initial impact of recent energy price increases. Overall, growth is expected to continue into 2026 albeit at a more moderate pace and alongside a higher inflation outlook. Given the external environment, downgraded growth forecasts are to be expected but the modest scale of the decrease reflects continued confidence in the resilience of the Irish economy.

      MDD is forecast to grow by 2.1% in 2026, a slight downgrade from the 2.3% growth forecast in last October’s Budget 2026. Conversely, projected GDP growth has been revised up to 3.1% (compared to 1.0% in Budget 2026) to reflect more optimistic assumptions for multinational export activity. The outlook for the labour market remains relatively unchanged from Budget 2026 estimates, with a 1.6% growth in total employment and an average unemployment rate of 4.7% for 2026 (APR 2026). Despite external risks, the job market is anticipated to remain robust even as growth moderates.

      Regarding prices, inflation projections have increased substantially on the back of increased energy prices. HICP is forecast at 3.3% in 2026, a notable increase when compared to Budget 2026 estimates of 1.9%. For 2027, the APR anticipations inflation to normalise somewhat to 2.5% under an assumption of scaled back energy prices.

      In addition to this baseline forecast, the APR includes a scenario analysis to assess how the current energy shock might impact the macroeconomic outlook (see Table 1). The adverse scenario assumes elevated energy prices that gradually normalise with oil prices averaging $90 per barrel this year and $88 per barrel in 2027. The severe scenario is based on a more long-term price shock, with assumed oil prices of $150 per barrel this year and $125 per barrel next year. Under the adverse conditions, inflation is estimated to increase to 3.7% this year and drop slightly to 3.5% in 2027 with MDD growth slowing to 2.0% in 2026 and 2.5% in 2027. The severe scenario forecasts a more sustained shock to inflation at 4.6% in 2026 and 5.3% in 2027, with MDD growth at 1.5% and 2.0% respectively. Similar to Central Bank and ESRI projections, the APR forecasts suggest a modest impact to overall macroeconomic growth despite the inflationary shocks. Even under the severe scenario, Ireland’s economy is expected to continue to grow.

      It should be noted that if the inflationary effects of the conflict continue, we could reasonably expect there to be effects not captured or illustrated by these models. Evidence shows lower income and rural households spend a higher portion of their income on energy, food and transport so are disproportionately impacted by higher fuel and heating costs.

      Table 1: DoF Middle East conflict scenario analysis

      2025

      2026f

      2027f

      MDD

      Budget 2026

      4.9

      2.3

      2.9

      Baseline

      4.9

      2.1

      3.0

      Adverse

      4.9

      2.0

      2.5

      Severe

      4.9

      1.5

      2.0

      Inflation

      Budget 2026

      2.1

      1.9

      1.9

      Baseline

      2.1

      3.3

      2.5

      Adverse

      2.1

      3.7

      3.5

      Severe

      2.1

      4.6

      5.3
  • Annual Progress Report 2026: Fiscal position

    • Against this macroeconomic backdrop, the APR also provides updated fiscal projections out to 2030, which show continued strength in the Irish fiscal position. The general government balance recorded a surplus in 2025 of €11.2 billion (3.3% of GNI*). For 2026, the APR forecasts a general government surplus of €9.2 billion (2.5% GNI*), a notable increase from the Budget 2026 forecast of €5.1 billion (1.4% GNI*). There are several factors contributing to this revision, including improvements to the balances of bodies outside the Exchequer, such as Local Government. Tax receipts are also forecast to increase by about 5.0% relative to last year (an increase of €1.6bn on the Budget 2026 estimate).

      As has been the case for several years, Ireland’s strong fiscal position is significantly helped by strong and growing Corporate Tax (CT) receipts. 2025 saw CT receipts of €33 billion and the APR forecast is for €35 billion this year. The Irish Fiscal Advisory Council estimates that the top 3 companies pay about 46% of all CT receipts and the ‘windfall’ element of the CT receipts is estimated at €20 billion for 2026 (APR 2026). This reinforces the much-discussed concentration risk in the Irish tax base and demonstrates a vulnerability to any change in corporate profit or restructuring.

      To mitigate against this risk, the Government established two long-term investment funds: the Future Ireland Fund (FIF) and the Infrastructure, Climate and Nature Fund (ICNF). 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 counter-cyclical 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 on designated environmental projects from the years 2026 to 2030. At end April 2026, there was approximately €20 billion across the two funds.

      On the expenditure side, the fiscal framework is shaped by the new government expenditure rules as set out in the Medium-Term Fiscal and Structural Plan published in December last year which sets out spending growth of 6% on average out to 2030. Capital spending by the government is also set to increase, demonstrating the continued commitment to investment in housing, transport, water and energy infrastructure as outlined in the national Development Plan. In response to the impact of increased fuel prices, the Government increased voted current expenditure by €625 million relative to Budget 2026.

      Despite spending expansion, debt dynamics are expected to improve with General Government Debt forecast to fall to €208.8 billion in 2026. This would bring the debt-to-GNI* ratio down to 58%, less than half the ratio of a decade ago. Looking forward to the latter part of the decade, gross debt is anticipated to increase again to €240 billion in 2030, however the debt ratio is forecast to continue to fall over the same time period to 54%. 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 sat at 41% of GNI* at end 2025, underscoring the improvement in Ireland’s sovereign balance sheet.

      Table 2: APR Macro and Fiscal Forecasts

      2025

      2026

      2027

      2028

      2029

      2030

      Real GDP (% change)

      12.3

      3.1

      3.5

      3.3

      3.3

      3.2

      Nominal GDP (% change)

      13.5

      4.6

      5.7

      5.4

      5.5

      5.4

      Real GNI* (% change)

      3.9

      3.2

      2.5

      2.5

      2.4

      2.4

      Real MDD (% change)

      4.9

      2.1

      3.0

      3.1

      3.1

      2.9

      Personal consumption (% change)

      2.9

      2.0

      2.3

      2.5

      2.3

      2.3

      HICP (% change)

      2.1

      3.3

      2.5

      1.7

      1.8

      2.0

      Core HICP (% change)*

      1.9

      2.8

      2.6

      2.1

      2.1

      2.1

      Employment (% change)

      2.2

      1.6

      1.4

      1.2

      1.0

      1.0

      Unemployment (per cent)

      4.7

      4.7

      4.8

      4.9

      4.9

      5.0

      GGB (€bn)

      11.2

      9.2

      9.0

      6.7

      2.1

      6.3

      GGB (% GNI*)

      3.3

      2.5

      2.4

      1.7

      0.5

      1.4

      Gross Debt (€bn)

      209.9

      208.1

      213.8

      223.5

      233.6

      239.6

      Gross Debt Ratio (% GNI*)

      61.7

      57.6

      56.0

      55.7

      55.4

      54.0

      Effective Interest Rate (per cent)

      1.4

      1.6

      1.9

      2.1

      2.4

      2.6

      * Core HICP excludes energy and unprocessed foods