Bank of Ireland has downgraded its economic growth outlook for the year, citing higher energy prices, rising inflation, weaker export performance and more cautious consumer spending as key pressures slowing the Irish economy.
In its latest update, the bank reduced its GDP growth forecast from 2.8% to 1.6%, warning that global uncertainty and elevated oil prices are feeding through into domestic costs and household budgets. Inflation is now expected to reach 3.3% this year, up from 2.2% in the previous year, largely driven by higher energy expenses.
Despite the downward revision, the bank said it does not expect Ireland to enter recession even if oil prices remain elevated at around €100 per barrel. It pointed to continued strength in the labour market as a stabilising factor, forecasting employment growth of 1.8% and describing job creation as “robust” in the current environment.
Housing remains a central concern in the outlook. The bank estimates that 37,500 homes will be built in 2026, slightly above last year’s 36,000, but still significantly below the more than 50,000 units annually that experts say are needed to ease the housing shortage. House prices are expected to rise by around 4% over the course of the year, adding further pressure to affordability challenges.
At the same time, Bank of Ireland highlighted the strength of the State’s public finances, noting that a projected €9 billion budget surplus could act as a buffer if additional support measures are required for households and businesses facing rising energy bills. However, the timing and scale of future increases in gas and electricity prices remain uncertain, with the bank basing its forecasts on an assumed 10% rise in household energy costs.
Group chief economist Conall Mac Coille said the Irish economy continues to show resilience despite external shocks. He pointed to previous periods of disruption, including Brexit, the Covid-19 pandemic, and the energy crisis triggered by Russia’s invasion of Ukraine, noting that Ireland had repeatedly absorbed global shocks without a sustained downturn.
He warned, however, that risks remain significant, particularly given disruptions in global energy markets. With an estimated 20% of global oil supply currently offline, he said further volatility could quickly feed into prices and consumer spending.
The report suggests that while Ireland’s economic foundations remain strong, the outlook has become more uncertain. Higher living costs and global supply pressures are expected to shape growth in the months ahead, even as employment and public finances provide some support against deeper slowdown risks.
