Bank of Ireland revises down projections for Irish growth

BoI expects GDP growth of 1.6%, down from 2.8% previously predicted

US forces operating in the Arabian Sea blockade an Iranian-flagged cargo vessel. Bank of Ireland has revised down its projections for Irish GDP growth amid the "enormous" global risks caused by the US and Israel's war on Iran. Picture: US Central Command via Getty Images)

Bank of Ireland has revised down its projections for Irish GDP growth amid the "enormous" global risks caused by the US and Israel's war on Iran, with inflation predicted to stay above 3% throughout the year.

In the bank's April economic forecast, the bank expects GDP growth of 1.6%, down from 2.8% previously expected. The downgrade reflects the global the recent uncertainty posed by events in the Middle East, combined with the unwinding of temporary factors that boosted exports in 2025, as US multinationals in Ireland and other firms frontloaded exports ahead of predicted US tariffs. The report does expect new pharmaceutical production facilities for weight-loss drugs to boost GDP growth "in the fullness of time".

Bank of Ireland sees consumer price index inflation remaining above 3% through the remainder of 2026, restraining consumer spending to a 1.8% expansion this year. Nevertheless, BoI group chief economist Conall Mac Coille expects a rebound to 3.6% growth expected in 2027.

“While the recent rise in oil and energy prices towards $100 per barrel represents an unwelcome squeeze on household real incomes and consumer spending, the Irish economy is expected to show the same resilience demonstrated during Brexit, the Covid‑19 pandemic, and the energy shock that followed Russia’s invasion of Ukraine," said Mr Mac Coille.

The projections were based on current oil prices close to $100 per barrel to ease towards $75 to $80 per barrel in early 2027.  “There are enormous risks - 20% of global oil supply remains cut off. ECB President Christine Lagarde has warned of a cliff-edge as the last ships that left the Middle East before the war finally reach their ports. (Bank of England governor) Andrew Bailey has cautioned a loss of investor confidence reminiscent of the global financial crisis could emerge if higher oil prices put pressure on bonds, stretched AI-equity valuations and private credit markets."

Bank of Ireland's April forecast said that recent Government action on excise duties has reduced the impact of higher petrol and diesel prices on inflation but said the expiry of excise duty cuts to petrol and diesel could push up inflation in August, "albeit hopefully accompanied by falling pre-tax prices".

The bank also predicts the Government has scope for further support given the State's predicted €9bn surplus, on top-of existing plans to raise public spending this year. The bank also expects expanded construction activity will provide a "tailwind to investment".

The forecast noted the number of payrolled employees in February was 2.57m, up 2.4% year on year, with initial estimates consistently revised upwards. "We expect pay growth of 4% in 2026. While individual households will no doubt be under pressure from energy prices, in aggregate household incomes should grow in real terms this year. Thus far, the impact of uncertainty in the Middle East on Irish business confidence surveys has been relatively muted. Events would have to deteriorate materially to derail investment plans already put in place."

Bank of Ireland expects housing completions to rise to 37,500 in 2026 and 40,000 in 2027.