Ireland’s fiscal watchdog has issued a stark warning that the Government risks overheating the economy with excessive spending in next month’s Budget.
The Irish Fiscal Advisory Council (Ifac), the independent body established after the financial crisis to oversee public finances, said the proposed €9.4 billion increase in expenditure for Budget 2026 was “not appropriate” given the economy’s current strength.
“A more restrained approach would help avoid overheating the economy and leave room to respond to future downturns,” Ifac said in its latest assessment.
The watchdog noted that spending has already far exceeded government projections this year. While the Coalition initially planned a €3 billion increase in expenditure, the figure is now likely to climb to €7.6 billion. The council said this repeats a pattern of overspending that has become common in recent years.
Among the most significant overruns were in the Departments of Education, Children and Justice, where expenditure rose by 7.5% compared with the 2.5% forecast in the Budget.
Ifac also warned the Government is increasingly reliant on windfall corporation tax receipts from multinational firms to fund higher spending. Stripping out those volatile revenues, public spending is running about €8 billion ahead of tax income.
“It is disappointing that the Government has not published a medium-term fiscal plan, which was promised for release this summer,” the council added, stressing that Ireland still lacks a formal spending rule to cap annual increases in expenditure.
Despite its concerns, the council acknowledged that the Irish economy remains in a strong position, with record levels of employment and solid consumer demand. It said that while uncertainty is rising due to US tariffs imposed by the Trump administration, these have not yet had a major impact on Ireland’s economy.
Ifac Chairman Seamus Coffey said the time for major budgetary stimulus is when the economy is weak, not when it is performing well. “The Irish economy is in a strong position, despite high uncertainty. As a result, this is not a time for a large budgetary package,” he said.
Speaking on RTÉ’s Morning Ireland, Coffey urged the Government to adhere to its own spending plans to restore credibility in budgetary policy. “You can have bodies like the Fiscal Council offering advice, but a key factor of restoring credibility will be the Government sticking to what it says itself,” he said.
He cautioned that continued overspending risks leaving Ireland exposed if corporate tax receipts fall or if growth slows. “The Government is adding to demand that is already performing well. It is perhaps allowing vulnerabilities to build up, and if there was a slowdown, those vulnerabilities could be exposed,” Coffey warned.
