IMF Warns Ireland Against Stimulus in Budget Amid High Inflation
The IMF has cautioned the Irish Government against budget stimulus due to high inflation and a full-capacity economy. It recommended temporary, targeted spending and addressing vulnerabilities like housing and reliance on multinationals. Ministers Harris and Chambers welcomed the assessment, agreeing on the need to tackle structural issues.
The International Monetary Fund (IMF) has warned the Irish Government against injecting unnecessary demand stimulus into the budget, citing an economy operating at full capacity and elevated inflation. The IMF advised that any discretionary fiscal spending should be temporary and targeted, aiming for a broadly neutral fiscal stance while efficiently scaling up public investment.
Ireland has exceeded its annual spending target by an average of €5.1 billion in each of the last three budgets, primarily due to day-to-day spending overruns. Minister for Public Expenditure, Jack Chambers, has instructed government departments to curb spending and plans to introduce enhanced oversight mechanisms before the budget.
The IMF projects Ireland's economy to grow at a slower but robust pace, with modified domestic demand moderating from almost 5 per cent in 2025 to about 2.5 per cent in 2026–27. Headline inflation is expected to rise to about 3.5 per cent this year before returning to 2 per cent around 2028. The IMF highlighted housing, infrastructure gaps, and reliance on multinationals as key vulnerabilities, recommending broadening the tax base and strengthening the fiscal framework.
Minister for Finance, Simon Harris, and Minister Chambers welcomed the IMF's assessment, acknowledging the identified risks and the need to address structural issues like infrastructure delivery and domestic capacity constraints.