Iran energy shock may lead to 4% inflation - Central Bank
A severe energy shock scenario caused by the Iran war could push inflation above 4% this year, according to the Central Bank.
The organisation has also warned that household incomes would also be eroded by higher fuel prices.
In its latest economic forecast, it said that domestic growth would be 2.9% this year, down from 4.9% in 2025.
The bank said its baseline assumption was that inflation would be 2.9% on average during 2026. But it is said in a severe scenario, inflation would be 4.2% in 2026 and 4% the following year.
Its Director of Economics and Statistics Robert Kelly said: "The extent of these effects really is dependent on the duration and intensity of the conflict and the scale of damage to critical infrastructure in the Middle East.
"These events highlight just how sensitive the Irish economy is to global developments and the need to maintain and build resilience in our domestic economy and public finances."
The bank said that the underlying deficit, when windfall gains paid by multinationals are excluded from the public finances, was set to double by 2028 as spending outpaces revenue collected by the State.
It also warned that the Government's ability to respond to the effects of the Iran war could become "more constrained".
The bank said the Coalition should focus on "targeted, temporary and tailored measures" to support the most vulnerable households.In its forecast, it said there would be a "gradual increase" in unemployment to just above 5% as the economy grows at a slower pace.
One housing, the bank predicted home completions will reach 40,000 this year up from 36,000 in 2025.
It expected that building will reach 43,000 units in 2027 and 46,000 in 2028.
It said higher housing output depended on the delivery of necessary public infrastructure.
