Quarterly Economic Commentary, Autumn 2026

Forecast overview 

• The Irish economy continues to grow steadily despite the uncertainties in the global economy. On the domestic side, unemployment remains low, household spending continues to increase and taxation revenues are rising across the board. This relatively strong domestic performance continues the robust trend seen since the COVID-19 pandemic. 

• On the international front, the global influences on the Irish economy are affected in two broad cross currents. On the one hand, the conflict in the Middle East appears to have escalated and has widened to include not only the Strait of Hormuz but now the Strait of Bab el-Mandeb. The damage to energy production infrastructure has continued and recently both gas and oil price futures have sharply increased. 

• Given Ireland’s reliance on fossil fuels, we are very exposed to the pass through of international price pressures to domestic households and firms. As in the previous Commentary, we draw on analysis by the National Institute for Economic and Social Research (NIESR) in the UK to inform the path of energy prices across the forecast horizon. 

• On the other hand, global expenditures on AI-related infrastructure have risen sharply, and have acted as a counterweight to the downside impacts of conflict internationally. Investments globally in the software, hardware and energy production necessary to drive the AI-economy are likely to benefit open, globally connected economies like Ireland. We are seeing the early signs of this in both investment and export data, and we expect this to contribute to growth over the period ahead. 

• This also increases Ireland’s exposure to downside risks that relate to the very rapid rollout of the new technology and the potential for return expectations on these capital outlays to underperform. This could have serious downside risks if some large corporates experience negative shocks. It also further heightens Ireland’s vulnerability to a small number of very large multinational firms, and highlights the concentrated, and correlated nature of risks to economic output, employment and the public finances. 

• Balancing these factors leads us to believe that economic growth in Ireland, as measured by modified domestic demand (MDD) in 2026 and 2027 will remain positive at 2.6 per cent and 3.4 per cent respectively. For Consumer Price Index (CPI) inflation, we now expect a rate of 3.6 per cent in 2026 and 3.3 in 2027. 

• A further dynamic that has developed internationally is a generalised rise in sovereign borrowing costs on the back of increasing fiscal deficits and indebtedness. For Ireland, despite its apparent healthy surpluses, borrowing costs have risen. This reinforces the requirement to build up fiscal buffers and manage the increasing vulnerability of the tax take from FDI-related revenues. 

• As noted for an extended period, housing output and infrastructure investment remain core concerns. We are forecasting housing output of 39,200 for 2026 and just under 40,500 for 2027. The absence of a sufficiently large, and sustained, increase in planning permissions highlights a potential weakness in the medium term. 

• The pass through of second-round price pressures to the construction supply chain is also a near term risk, which could add to downside pressure on housing. A recent research paper by Egan and O’Shea (2026) highlights that Irish house prices have deviated from fundamentals by up to 17 per cent. The main catalysts noted for this development are affordability pressures rather than credit-driven dynamics; incomes have risen at a slower pace than house prices and chronic supply shortages have not been addressed. This research reinforces the requirement to support additional expenditures on investment in housing, in particular targeted at low and middle income households.