The Irish economy is positioned to navigate ongoing geopolitical risks in the Middle East without slipping into recession, according to the latest economic outlook from Bank of Ireland. In its April 2026 forecast released on 28 April, the bank trimmed its projection for GDP growth this year to 1.6 per cent—down from a previous estimate of 2.8 per cent—while anticipating a strong rebound to 3.6 per cent expansion in 2027.
The Bank of Ireland pointed out that the downward revision stems from two main factors: the fading of one-off export surges seen in 2025, when firms front-loaded shipments ahead of potential US tariffs, and fresh uncertainty triggered by developments in the Middle East that have pushed oil prices higher.
Despite Brent crude recently approaching $100 per barrel, Bank of Ireland bases its central scenario on futures markets pointing towards $75 per barrel later in the year, suggesting any supply disruptions will prove temporary. Even at elevated energy costs, the bank insists these pressures will not derail the broader recovery.
Group Chief Economist Conall Mac Coille noted that Ireland has repeatedly shown resilience in the face of shocks, from Brexit and the Covid-19 pandemic to the energy crisis following Russia’s invasion of Ukraine.
“While the recent rise in oil and energy prices represents an unwelcome squeeze on household real incomes and consumer spending,” he said, “the Irish economy is expected to show the same resilience.”
Inflation remains a key headwind. Consumer prices are now forecast to average 3.3 per cent in 2026—staying above the 3 per cent mark for the rest of the year—before easing to 2.6 per cent in 2027.
This elevated rate is expected to limit consumer spending growth to a modest 1.8 per cent in 2026.
Ireland’s exposure to surging home-heating oil costs, which rose 63 per cent and helped push HICP inflation to 3.6 per cent in March (the fifth-highest in the euro area), explains much of the stickiness.
Planned reversals of fuel excise cuts in August and possible increases in electricity and gas bills from late 2025 will add further upward pressure.
Yet the labor market continues to provide a solid foundation. Employment is projected to grow by 1.8 per cent this year, keeping the unemployment rate steady at a low 4.8 per cent, while wages are expected to rise 4 per cent.
In aggregate, household incomes should still record positive real growth despite inflation, supported by a high savings ratio of 14 per cent in 2025, declining debt levels, and bank deposits that climbed 6.3 per cent year-on-year to €172 billion by February.
Individual households facing higher energy bills may feel the strain, but the overall picture remains one of financial strength. Investment activity is also holding firm.
Business confidence surveys have registered only a mild softening in response to Middle East events.
Housing completions are on track to reach 37,500 units in 2026 and 40,000 the following year, bolstered by a 6 per cent rise in non-residential construction and a 17 per cent increase in public capital spending to €19 billion.
The ongoing AI-related investment cycle adds further momentum. House price inflation forecasts remain unchanged at 4 per cent for 2026, even as recent asking-price data shows some moderation.
On the public finances front, the government is now projected to record a €9 billion surplus in 2026—equivalent to 2.5 per cent of GNI—providing a valuable buffer should additional energy support measures become necessary.
The export sector, concentrated in relatively stable areas such as agri-food, ICT services, pharmaceuticals and medtech, is expected to demonstrate defensive qualities. New capacity for weight-loss drugs will also lend support as temporary drags from 2025 unwind.
While Middle East developments introduce clear risks—including potential volatility in global financial markets—Bank of Ireland concludes that Ireland enters this period from a position of underlying economic strength. With steady employment, healthy public finances, and investment plans already in motion, the economy appears equipped to absorb near-term pressures and deliver a healthy economic rebound next year.
