Ireland’s economy to grow despite inflation pressures
AIB’s Autumn 2026 Economic Outlook Report projects Ireland’s economy will expand by 3.8% this year. This growth projection comes even as inflation and geopolitical risks persist, with the bank forecasting consumer prices will remain above the central bank’s target. Inflation is expected to stay at 3.5% in 2026, then ease to 3.1% in 2027 before finally reaching 2% in 2028.
The revision follows last year’s 4.7% growth, fueled by investment, housing construction, and public infrastructure spending. Higher energy costs and borrowing rates will likely dampen household and business spending. AIB anticipates 39,000 new homes will be completed this year, increasing to 45,000 by 2028.
Employment has risen by 461,000 since 2020, reaching over 2.8 million workers. Job growth is now expected to slow to 1.2% in 2026, while the unemployment rate is projected to climb from 4.6% last year to 5.1%. Consumer spending will still grow by 2.3% this year and 2.1% in 2027, supported by households maintaining a savings rate near 20%.
Exports are set to increase by 2.8% in 2026 and 5.2% in 2027, with AI-related shipments now making up nearly 13% of customs goods exports—double their share from 2025. This change highlights Ireland’s expanding presence in technology-driven trade, though the economy’s dependence on multinational corporate tax policies introduces volatility. The report notes a projected €9.5 billion budget surplus in 2027, as public finances remain tied to tax revenue fluctuations.
Economic Forecast Adjustments and Financial Risks
AIB raised its outlook for Modified Domestic Demand (MDD) growth, projecting a 3.1% increase in 2027 after last year’s 4.7% expansion. The report highlights persistent inflation as a key concern, warning that rising prices will reduce household purchasing power and slow consumer spending.
Public finances face continued dependence on corporation tax revenue, despite a €9.5 billion surplus expected in 2027. Strong balance sheets among households and businesses provide stability, but geopolitical tensions, inflation, and higher borrowing costs create significant downside risks for the economy.
