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Bank of Ireland has raised its 2026 growth forecast for Ireland to 3.8%, driven by resilient consumer spending, strong AI-related investment and increased foreign direct investment. The bank expects employment and wages to continue rising, while warning that inflation could reach 4% and limit household purchasing power.
Ireland, 15 years ago, was Europe’s austerity poster boy. The export-driven Celtic Tiger economy had come undone. The banking system was bust and the then government, controlled by a troika of creditors, was forced into implementing a swingeing series of cutbacks.
Ireland was the zeitgeist of the financial crash period. Everything bad about it played out here. Fast forward 15 years and we now find ourselves at one remove from the debt and fiscal troubles infecting most of our peer group, largely because of windfall corporation taxes and an economy that is still growing strongly despite the international headwinds.
Contrast that with the UK or the US or France, where mounting public debt and elevated inflation are pushing bond yields, which determine everything from car loans to mortgages, higher and higher. Bank of Ireland yesterday upgraded its growth forecast for the economy on the back of what it said was “resilient consumer spending and the AI-related investment cycle”.
The bank revised up its forecast for modified domestic demand, a bespoke measure for growth here, to 3.8 per cent for 2026, reflecting what it said was the strength of AI-related investment in ICT and other machinery equipment, which rose by 37 per cent to €8 billion in the first half of 2026.
“FDI into Ireland is also benefiting, evident in recent announcements from Intel, Anthropic and OpenAI amongst others,” it said. While warning that elevated inflation, which is now expected to rise to 4 per cent in the final months of 2026, would keep the price squeeze on households, Bank of Ireland’s assessment is more upbeat than downbeat.
It forecasts consumer spending growth would moderate to 1.8 per cent this year because of inflation, while noting this was “still positive and a sharper expansion than expected in the UK and European countries”. Job creation , pay growth and the €1.5 billion of tax cuts planned in Budget 2027 will help real household incomes to grow despite inflation, it said.
This time around, we seem to be residing outside the financial zeitgeist of debt and fiscal constraint.
Irish Economy Economic Growth AI Investment Foreign Direct Investment Inflation
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