Quarterly Bulletin 2026:3 – Steady growth amid heightened inflation and ongoing external uncertainty

16 September 2026 Press Release

Central Bank of Ireland

Modified domestic demand (MDD) growth is being revised up modestly in 2026 to 3.8 per cent and to 3.4 per cent in 2027, supported by resilient consumer spending and multinational investment
Headline inflation is projected to average 3.4 per cent in 2026, moderating to 3.1 per cent in 2027 and 2.0 per cent in 2028
Significant increase in housing output expected out to 2028, but increasing delivery times require timely implementation of reforms.

The Central Bank has today (16 September 2026) published its third Quarterly Bulletin of 2026. At the launch of the Quarterly Bulletin, Robert Kelly, Director of Economics and Statistics said: “Trade tensions remain high and firms are adjusting to a fragmented and less favourable trading environment. Across Europe, the summer period saw record temperatures and prolonged drought. This has placed strain on food production and transportation, adding a further impetus to already high inflation. Closer to home, the labour market is experiencing structural shifts, including adoption of new technologies, continued ageing of the population and the increasingly important role of net inward migration – already accounting for around two-thirds of employment growth. In the face of these significant structural forces, the economy has displayed impressive resilience to date, but careful policy choices and long-term planning will be needed to sustain steady economic growth and low unemployment, reduce inflation and improve the underlying health of the public finances.”

The economy, as measured by real modified Gross National Income (GNI*), grew by 4.7 per cent last year. The rapid pace of growth means that the overall size of the economy – based on GNI* in real terms – increased by 35 per cent or €89bn between 2019 and 2025. The growth in the economy has delivered employment growth, higher incomes and increased government revenue.

Multi-National Enterprise (MNE)-related investment is providing a significant stimulus to overall modified domestic demand (MDD) at present. A clear underlying trend is evident with the level of machinery and equipment investment having risen in real terms by over one third in just three years. Substantial increases in spending on AI-related and data-centre hardware by multinational firms in Ireland is underpinning the growth. Looking ahead, resilient consumer spending and further growth in MNE investment is expected to support annual average growth in MDD of 3.5 per cent from 2026 to 2028.

Employment recovered in the second quarter, growth for 2026 as a whole is projected to remain below rates observed in recent years. Employment is forecast to grow by 1.2 per cent this year, before rising to 2.1 per cent in 2027. Net inward migration will remain a key source of labour supply in the coming years.

There has been a welcome rise in residential construction activity with housing completions more than doubling between 2017 and 2025. Further increases in housing output are expected out to 2028 but this rests on achieving progress across several dimensions that influence the delivery of housing. Signals from housing commencements continue to be difficult to interpret, while annual planning permissions have remained broadly stable in the mid-30,000s our analysis shows that for the current pipeline of housing activity (already approved or commenced dwellings), the average duration from the initial lodgement of planning application to completion is four years, twice as long as a decade ago. These considerations weigh on the overall outlook for housing completions and emphasise the importance of timely implementation of reforms to speed up the delivery of key national infrastructure, including those in the Accelerating Infrastructure and Action Plan. These reforms, if actioned in an effective and timely manner and combined with measures to increase productivity, should facilitate the delivery of increased housing supply outlined in our central forecast.

Higher energy prices have added significantly to headline inflation in 2026 as the Iran-US war has pushed up international energy prices. Along with these externally determined price pressures, domestic services inflation remains elevated. Risks to the inflation outlook are to the upside, stemming from the potential for a prolongation of geopolitical tensions in the Middle East. In a severe scenario involving significantly higher international oil and gas prices, headline inflation could be over 2 percentage points higher in 2027 than in the central forecast, with growth weaker.

To avoid stoking existing inflationary pressures, the expenditure ceilings in the Summer Economic Statement should be adhered to in the forthcoming budget. This would help to limit fiscal exposure to potentially transitory corporation tax receipts, concentrated among a small number of multinational firms. Maximising the delivery of new public infrastructure to address known deficits in key national infrastructure and crowd in higher private investment will boost the economy’s long-run growth potential. Investment targeted at accelerating the decarbonisation of the economy would help reduce exposure to volatile imported fossil fuel prices (including as a result of geopolitical shocks) and support a more stable cost of energy for Irish households and businesses. For households particularly exposed to the effects of higher energy prices, temporary and targeted measures can protect the most vulnerable while still ensuring that the overall budgetary stance builds resilience in the public finances.

ENDS

Further information -

Box A analyses the composition of modified national income (GNI*). It shows that although labour and other income derived from domestic sources accounts for the majority of real GNI*, the contribution of MNEs (including MNE corporation tax, wages and other related income) has increased substantially over time – from 16 per cent in 2013 to 26 per cent in 2025.

Box B uses project-level records on housing activity to document how many projects reach each stage of construction (planning approval, commencement, completion), how long each stage takes, and how durations have changed over time. The analysis shows that for a given pipeline of housing activity currently (already approved or commenced dwellings), the average duration from the initial lodgement of planning application to completion is four years, twice as long as a decade ago. If actioned in an effective and timely manner, recent reforms such as the Accelerating Infrastructure Report and Action Plan should facilitate the delivery of increased housing supply as outlined in our central forecast.