The Irish economy remains resilient, with export growth solid and domestic demand robust, but overseas risks are the big unknown says KPMG’s Head Economist Daragh McGreal.
The Irish economy continues to outperform many European peers, but conflict in the Middle East has generated significant supply chain shocks and energy price volatility. Economic growth in Ireland for the whole of 2026 may be in the range 2 to 2.5 percent, down from an expectation of growth from 2.5 percent to 3 percent at the start of the year.
Meanwhile a potential 0.5 percent rise in interest rates would mean an average new first-time buyer could expect annual repayments to be €1,200 higher.
Ireland entered 2026 with strong fundamentals: employment at record highs of over 2.8 million, unemployment hovering at 5 percent, and headline inflation on a downward trajectory at 2.8 percent. Export driven sectors, particularly pharmaceuticals, technology and internationally traded services, continued to underpin activity.
However, the external environment has deteriorated materially since the start of the year. Geopolitical instability and war in the Middle East, renewed global trade tension and disruption to shipping and energy markets are feeding into higher uncertainty and renewed inflation risks across Europe.
Ireland is still growing, still creating jobs, still attracting investment, and still exporting – but the global context has become much more hostile. For a highly open economy, the issue is not whether shocks arrive, but how often and how severely they spill over, and how we respond to them.
