Irish Economy Set for Robust Growth in 2026, But Significant Risks Remain
LTT Media - 2026 - Business & Economy
Ireland’s economy is projected to deliver strong growth in 2026, outperforming many European peers, according to the KPMG Irish Economic Outlook and supporting economic data. The forecast anticipates that gross domestic product (GDP) will expand by approximately 3 per cent next year, underpinned by solid domestic demand, sustained employment growth and strategic government investment. Modified domestic demand a core measure that strips out distortions from multinational corporate activity is expected to grow around 2.5 per cent, signalling underlying strength in the domestic economy.
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Key Drivers of Growth
Economists highlight several factors contributing to Ireland’s economic resilience:
Continued export momentum, particularly in pharmaceuticals and high-value manufacturing, which remains a pillar of growth.
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Employment growth, with job numbers expected to rise, although at a more moderate pace than in recent record years.
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Government capital investment, including allocations under the €103 billion National Development Plan and a €19 billion capital budget for 2026, aimed at supporting infrastructure, housing and productivity enhancements.
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Despite strong headline growth, analysts note a normalisation of labour market dynamics, with unemployment forecast to steady around 5 per cent and employment growth moderating compared to previous years’ rapid gains.
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Risks and Challenges Ahead
Economic forecasters emphasise that Ireland’s outlook remains subject to a range of domestic and international risks:
Global trade tensions, particularly geopolitical uncertainty and shifting supply chains, could dampen export performance and investment sentiment.
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Infrastructure bottlenecks, including persistent transport delays around the Greater Dublin area, risk undermining productivity and adding costs for businesses and households. Delays or cost overruns on major projects could limit the full impact of government capital investment.
KPMG
Housing supply constraints continue to pose a drag on growth, with recent analyses indicating that national housing output is likely to fall short of rising demand. The Central Bank has warned that meeting long-term housing targets will remain difficult without significant improvements in construction capacity and cost management.
The Leinster Partnership
Inflationary pressures including high prices for essentials such as food, rents and housing may outpace wage gains in some sectors, affecting household disposable incomes and consumer confidence.
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The Economic and Social Research Institute (ESRI) has also underscored Ireland’s exposure to external shocks, particularly through reliance on multinational corporations for tax revenues and employment, noting that further structural reforms will be necessary to sustain robust long term growth.
TheJournal.ie
Forward Outlook & Summary
Ireland’s economy is poised for above-average performance in 2026, with growth forecasts significantly stronger than those anticipated in many European economies. However, downside risks tied to global uncertainty, domestic infrastructure and housing pressures, and inflationary dynamics temper the outlook. The balance between robust growth and these vulnerabilities will shape Ireland’s economic trajectory in the coming year.
Aaron Joyce, Newswire, LTT Media; Newsdesk; 31 December 2025
Image Credit - ISEA