As oil and inflation outlook shifts Bank of Ireland chief economist flags easing energy costs, steady US growth and rising scrutiny of corporate tax reliance.
Ireland’s domestic economy continues to show underlying strength even as global markets adjust to falling oil prices, persistent inflation and evolving monetary policy expectations, according to Bank of Ireland’s latest economic and market update.
Speaking at the bank’s June outlook webinar this morning (24 June 2026), Bank of Ireland group chief economist Conall Mac Coille said recent movements in energy markets are likely to influence inflation and growth patterns through the remainder of 2026 and into next year.
“We really are most of the way back at this point”
He was joined by the Bank’s head of Food & Beverage Sector Lucy Ryan who provided an update on how one of Ireland’s most important domestic sectors is managing the global shifts.
Oil prices have eased back to about $76 per barrel following a US Iran agreement, moving closer to levels seen earlier in the year.
“We really are most of the way back at this point,” Mac Coille said, noting that futures markets suggest a further drift towards $70 per barrel.
He said lower energy costs should pass through into headline inflation over the coming quarters, with early signs already visible at fuel stations. “That will make its way into energy prices quite quickly… you’re already seeing this in the forecourt in Ireland.”
US strength steadies global outlook
The US economy remains a central driver of global growth, supported by strong consumer demand, employment and ongoing investment linked to artificial intelligence.
Mac Coille pointed to projected US GDP growth of 2.1% in both 2026 and 2027, describing the outlook as “very resilient”.
Europe and the UK are experiencing a softer trajectory. Survey data suggests subdued activity in the short term, with flat growth expected across key quarters. Inflation across advanced economies is expected to remain above central bank targets into 2027, even as energy costs ease.
Central banks continue to signal caution. While interest rate expectations have moderated slightly, markets still assume borrowing costs will remain above long-term neutral levels for an extended period.
Markets recover but vulnerabilities persist
Equity markets have staged a recovery, with European indices regaining earlier losses linked to geopolitical tensions and US benchmarks continuing to deliver annual gains.
“Equities look kind of very striking,” Mac Coille said, highlighting the pace of the rebound across major markets.
Bond market dynamics reflect a more complex picture. Rising US yields point to stronger economic data and shifting expectations around Federal Reserve policy, while UK and European yields have been sensitive to domestic political developments.
Currency markets have remained within established trading ranges, with the dollar supported by investor demand for US assets, particularly in the technology sector.
Ireland’s domestic picture remains robust
Ireland’s headline GDP figures have been affected by multinational activity, with a sharp contraction in the first quarter reflecting earlier distortions linked to tariffs and pharmaceutical exports.
“Competitiveness is really key from Ireland’s point of view as such a big exporter of food and drink”
“The domestic side, though, [is] reasonably healthy,” Mac Coille said, citing solid consumer spending, government expenditure and strong investment.
Construction activity is gaining momentum, with housing completions expected to reach close to 40,000 units this year. “That is a massive improvement where we were just 12 to 18 months ago,” he said.
House prices have remained flat during the early part of 2026, although market data points to renewed momentum through the summer, with buyers continuing to pay premiums above asking prices.
Inflation in Ireland has risen to around 3.5% but is expected to ease as lower energy costs feed through to the wider economy. The expiry of certain government supports later in the year may create some short-term volatility in price levels.
Labour market signals mixed trends
Employment data presents a mixed picture. Tax-based measures continue to show growth in employment, while survey-based indicators suggest some softening, particularly in part-time roles across sectors such as retail and hospitality.
Technology sector employment among multinationals has stabilised following an earlier period of expansion, reflecting a rebalancing after strong hiring during the pandemic years.
“I wouldn’t want to understate the role of AI potentially going forward,” Mac Coille said. “But I think it’s just far too early… this weakness… is probably not really related to AI.”
Corporate tax dependence under scrutiny
Ireland’s public finances remain significantly dependent on a relatively small number of multinational taxpayers, a trend that is becoming more visible as disclosure requirements increase.
A small group of companies accounts for a large share of corporate tax receipts, underpinning the State’s budget surplus.
Mac Coille said this concentration requires careful oversight. “You should be taking a very cautious view of the public finances at the moment.”
Food and drink sector adapts to cost pressures
Lucy Ryan, head of Food and Beverage Sector at Bank of Ireland, highlighted ongoing pressures facing producers as they contend with high input costs, supply chain disruption and evolving regulation.
“High staffing and operating costs do continue to be a challenge,” she said, pointing to increased adoption of automation and efficiency measures aimed at protecting margins.
Energy and commodity price volatility continue to influence pricing decisions, while shipping costs and geopolitical factors remain key considerations for supply chains.
Despite these challenges, sentiment across the sector remains positive. A recent survey by Bank of Ireland and Love Irish Food found that more than 62% of operators are confident in their growth prospects.
“Competitiveness is really key from Ireland’s point of view as such a big exporter of food and drink,” Ryan said.
Investment delivery in focus
Mac Coille said that attention is turning to the implementation of Ireland’s National Development Plan, which envisages a substantial increase in capital expenditure in the coming years.
While funding allocations have risen, questions remain around the pace at which projects are being delivered and whether spending will translate into tangible infrastructure outcomes.
The outlook for Ireland will continue to be shaped by global energy dynamics, Central Bank policy and multinational investment trends.
For now, Mac Coille said that a combination of steady domestic demand and improving external conditions provides a measure of stability for businesses navigating a complex operating environment.
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