EY Forecasts Slower Irish Economic Growth in 2026 Due to Iran Conflict
The EY Economic Eye forecast predicts slower economic growth for Ireland in 2026 due to a fuel crisis from the Iran conflict. Inflation is expected to rise, with Ireland at 3.1% and Northern Ireland at 0.7% in 2026. Despite challenges, the job market will grow, and consumer spending will increase.
Economic growth across the island of Ireland is projected to continue in 2026 but at a slower pace, primarily due to a fuel crisis stemming from the conflict involving Iran, according to the EY Economic Eye forecast.
EY forecasts Ireland’s inflation rate at 3.1% for 2026 and 2.4% for 2027, while Northern Ireland’s is expected to be 0.7% in 2026 and 1.3% in 2027. This increase in Irish inflation is attributed to the Middle East conflict and the shutdown of the Strait of Hormuz, a vital oil trading route. While current inflationary shock is less severe than that following the Ukraine invasion, energy prices remain a key risk.
The Irish jobs market is expected to grow, with unemployment remaining low at 5% in 2027, despite easing employment growth in 2026 and 2027. Irish GDP is forecast to grow 1.8% in 2026 and 4.2% in 2027. Modified domestic demand is projected to rise by 2.7% in 2026 and 2.5% in 2027. Northern Ireland’s economy is also expected to grow, with jobs increasing by 0.6% for both 2026 and 2027.
Dr. Loretta O’Sullivan, chief economist at EY Ireland, noted that 2026 is marked by global energy volatility, challenging the Irish economy after a strong 2025. Despite the energy price impact, consumer spending is still forecast to increase. Carol Murphy, EY Ireland head of markets, emphasized that geopolitics now directly influences business strategy, supply chains, investment, talent, and resilience.