Ireland’s domestic economy is projected to grow by 2.7 percent this year, according to a new outlook from tax and advisory firm EY, even as rising inflation and geopolitical tensions continue to shape the economic landscape.
The report highlights that inflation is expected to average 3.1 percent in 2026, following a sharper increase to 3.6 percent in March. That spike was linked in part to higher energy prices driven by global supply disruptions tied to the ongoing conflict involving Iran, which has added pressure to household costs across Europe.
Despite these challenges, EY said Ireland’s labour market remains strong, with employment forecast to rise by 1.8 percent this year. Household spending is also expected to remain resilient, with a projected increase of 2 percent in 2026, supported by steady wage growth and continued job creation.
Dr Loretta O’Sullivan said consumer spending remains a key driver of the domestic economy. She noted that even with rising energy costs, household expenditure is expected to continue growing this year and into next.
She added that Ireland has so far managed to withstand external pressures, including trade tensions linked to US tariffs in previous years. However, she warned that the main challenge ahead will be managing exposure to volatile energy markets while maintaining economic stability.
According to the report, employment growth is expected to moderate in 2026 and 2027 as hiring becomes more cautious. Even so, unemployment is forecast to remain low by historical standards, stabilising at around 5 percent.
Dr O’Sullivan said government support for households facing higher energy costs should be carefully targeted and temporary in nature. Speaking on RTÉ’s Morning Ireland, she said Ireland’s strong fiscal position, supported by budget surpluses and low unemployment, provides a cushion against external shocks.
However, she also stressed the importance of long-term structural adjustments. She said Ireland should reduce reliance on fossil fuels, expand economic diversification, and invest more heavily in infrastructure to strengthen resilience against global disruptions.
The report also highlighted regional differences. In Northern Ireland, economic growth is expected to continue but at a slower pace than the Republic. Employment growth there is forecast at 0.6 percent annually through 2026 and 2027.
Rob Heron said the region’s economy remains stable but increasingly affected by global uncertainty. He pointed to rising costs, weaker confidence, and more cautious investment decisions as key constraints.
Meanwhile, Carol Murphy said businesses are now operating in an environment shaped by overlapping geopolitical, economic, and technological pressures. She noted that these factors are directly influencing supply chains, investment decisions, and workforce planning.
She added that companies must focus less on predicting future shocks and more on building flexibility to respond quickly when conditions change. Policymakers, she said, will also need to strengthen economic resilience to maintain Ireland’s position as a competitive destination for investment and innovation.
The overall outlook suggests steady but cautious growth, with Ireland continuing to outperform many peer economies despite an increasingly complex global environment.
