Economic growth to moderate of next two years after strong 2025
Ireland’s economic growth is set to moderate over the next two years following a standout performance in 2025, as global uncertainty and rising energy costs weigh on the outlook, according to EY’s latest Economic Eye forecast.
The report projects GDP growth of 1.8% in 2026, before strengthening to 4.2% in 2027.
While this represents a slowdown from last year’s exceptional expansion, the domestic economy is expected to remain resilient, supported by continued job creation and steady consumer spending.
Modified Domestic Demand, a key measure of underlying economic activity, is forecast to increase by 2.7% this year and 2.5% next year.
Household consumption is also expected to remain a positive driver, growing by 2% in 2026 and 2.3% in 2027, although higher energy costs and global uncertainty may temper spending decisions.
The labour market continues to perform strongly, with employment reaching a record 2.83 million in late 2025.
Hiring activity appears to have carried into early 2026, though growth is expected to ease to 1.8% this year and 1.6% next year. Unemployment is projected to rise slightly but remain low by historical standards, reaching 5% by 2027.
However, inflation is emerging as a renewed concern. EY forecasts the headline rate will increase to 3.1% in 2026, up from 2.2% last year, driven largely by escalating tensions in the Middle East and their impact on global energy markets.
Dr Loretta O’Sullivan, Chief Economist at EY Ireland, said the global backdrop has shifted significantly.
“If 2025 was the year of US tariff uncertainty, then 2026 is the year of global energy volatility. Having navigated the former well, the Irish economy is now being challenged by the latter,” she said.
“Last year saw a very strong performance by the Irish economy, beating all forecasts, and it is only to be expected that this would unwind somewhat in 2026. Combined with the impact of the conflict in the Middle East, we are projecting more moderate but still decent growth this year.”
She added that consumer spending remains a key barometer of economic health: “Even with the significant energy price impact we are still forecasting this to increase this year and next.”
EY’s report highlights resilience as a central theme, as businesses and policymakers respond to a more volatile global environment marked by geopolitical tensions, supply chain disruption and shifting trade dynamics.
Increasingly, organisations are focusing on strengthening digital systems, energy security and infrastructure to support long-term competitiveness.
Carol Murphy, EY Ireland Head of Markets
Carol Murphy, EY Ireland Head of Markets, said geopolitical risk is now a core business consideration. “For organisations, geopolitics is no longer an intangible risk, it’s directly influencing strategy, supply chains, investment, talent and resilience in real time,” she said.
In Northern Ireland, the outlook is more subdued, with growth forecast at 0.7% in 2026 and 1.3% in 2027, reflecting similar global pressures alongside tighter public finances and persistent inflation.
