EY forecasts steadier expansion through 2027, with jobs growth and consumer spending continuing to underpin the domestic economy.
EY forecasts steadier expansion through 2027, with jobs growth and consumer spending continuing to underpin the domestic economy
The Irish economy is expected to continue expanding over the next two years, though at a calmer pace following the exceptional growth recorded in 2025.
“We are projecting more moderate but still decent growth this year, something many of our peer nations will not be expecting”
According to EY’s Spring 2026 Economic Eye, output is forecast to rise by 1.8% in 2026 and 4.2% in 2027, as global energy volatility and geopolitical tensions reshape the international economic landscape.
While overall growth is set to moderate, EY expects the domestic economy to remain on a solid footing. Modified Domestic Demand, a key measure of underlying activity, is projected to increase by 2.7% in 2026 and 2.5% in 2027. Ongoing job creation and rising incomes are expected to support household spending, even as higher energy prices weigh on budgets.
Full employment is a pillar
Household consumption is forecast to grow by 2% in 2026 and 2.3% in 2027. EY points to continued wage growth and a strong employment base as central supports for consumer activity, with spending decisions reflecting a more cautious global backdrop.
“If 2025 was the year of US tariff uncertainty, then 2026 is the year of global energy volatility”
The labour market also remains a pillar of the outlook. Employment reached a record 2.83 million people in the final quarter of 2025, and income tax receipts indicate that hiring continued into early 2026.
EY expects employment growth of 1.8% this year, easing to 1.6% in 2027, in line with softer economic momentum. The unemployment rate is forecast to edge higher over the period, reaching 5% by 2027, a level that remains low by long-term standards.
Inflation has moved higher following the escalation of conflict in the Middle East and the resulting rise in global energy prices.
EY projects headline inflation of 3.1% in 2026, up from 2.2% last year, before easing to 2.4% in 2027. The firm notes that this represents a second global energy shock within a decade, though the inflationary impact to date has been less severe than that experienced after the invasion of Ukraine.
At a global level, EY expects world growth to ease to 2.8% in 2026, down from 3.4% in 2025. Inflation in the euro area is forecast to average 2.8% this year, before falling back toward target at 2.2% in 2027.
Dr Loretta O’Sullivan, chief economist at EY Ireland, said energy volatility had become a defining feature of the current outlook.
“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. 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 on the global energy market and the world economy, we are projecting more moderate but still decent growth this year, something many of our peer nations will not be expecting.
“Consumer spending is a key indicator of the health of the domestic economy and even with the significant energy price impact we are still forecasting this to increase this year and next,” O’Sullivan said.
Geopolitical risks
Resilience is a central theme of the Spring Economic Eye, as businesses and policymakers adapt to a more fragmented global environment.
EY highlights rising geopolitical risk, supply chain disruption and changes in global trade as factors increasingly influencing costs, investment decisions and operational priorities.
The report identifies vulnerabilities across digital systems, energy markets and infrastructure capacity. In response, businesses are accelerating the adoption of digital technologies, including artificial intelligence, to improve productivity and decision making.
Investment in energy security and sustainability is also seen as supporting greater cost certainty and long-term competitiveness, while stronger infrastructure is viewed as a route to unlocking productivity gains across the economy.
Carol Murphy, Head of Markets at EY Ireland, said geopolitics is now a tangible issue for leadership teams.
“In today’s volatile environment, businesses are navigating conflict on three interlinked fronts, with military, economic and technological challenges directly shaping commercial and strategic decisions. For organisations, geopolitics is no longer an intangible risk, it’s directly influencing strategy, supply chains, investment, talent and resilience in real time.
“For leadership teams, the challenge is less about predicting what happens next and more about building the agility and capability to act when conditions change. For policymakers, building resilience across the economy will be central to helping Ireland navigate today’s uncertainty and remain an attractive and trusted place to invest, innovate and do business.”
Northern Ireland outlook
In Northern Ireland, EY forecasts continued growth within a more constrained environment. Private sector activity entered 2026 on a positive note, according to PMI data, while rising fuel prices, Middle East tensions and shifts in global trade policy are adding pressure.
EY expects the Northern Ireland economy to grow by 0.7% in 2026 and 1.3% in 2027, with employment increasing by 0.6% in each year.
Rob Heron, Managing Partner at EY Northern Ireland, said resilience remains evident across the regional economy.
“Northern Ireland’s economy continues to show resilience, but growth is increasingly constrained by global volatility, impacting costs, confidence and investment decisions. Understanding how global tensions, trade arrangements and policy choices affect local businesses is becoming more important for business leaders and policymakers in Northern Ireland as they plan for the future.”
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