Irish GDP to fall by 2.5% this year as economy moderates 

PwC anticipates GDP to fall this year before recovering in 2027 and 2028

The projected GDP growth in 2027 and 2028 may signal a return to a more normalised growth path over the medium term, PwC said. Picture: Larry Cummins

The Irish economy is set to moderate after a strong performance last year, with gross domestic product (GDP) expected to fall by 2.5% in 2026, PwC has said in its latest Economic Digest.

While the broader picture looks resilient, the professional services firm said a combination of global headwinds, inflationary pressures and weaker consumer sentiment is expected to shape the near-term trajectory of the Irish economy.  

Anticipated to fall to 2.5% by 2026, GDP is anticipated to grow by 3.7% in 2027 and 3.8% in 2028, PwC said.

Last year saw a massive expansion in the economy with GDP growth of more than 12%, underpinned by a surge in pharmaceutical exports to the US ahead of anticipated tariff measures by Donald Trump.

The projected GDP growth in 2027 and 2028 may signal a return to a more normalised growth path over the medium term, PwC said.

Alongside GDP, PwC expects modified domestic demand (MDD) growth, a more reliable measure of Ireland’s underlying economic performance, of 2.7% in 2026, down from 4.6% in 2025, before easing further to 2.5% in 2027 and 2028. 

PwC said the trajectory points to a steadier underlying growth path reflecting the risks posed by external uncertainties, inflation, and softening domestic momentum.

Meanwhile, Ireland’s inflation outlook points to a near-term pick-up before easing, with PwC expecting inflation to rise in the near-term to 3.1% in 2026, up from 2.2% in 2025. 

This reflects continued price pressures, particularly in energy and food, driven in part by ongoing geopolitical tensions in the Middle East and associated volatility in global commodity markets. However, inflation is projected to ease gradually over the medium term, returning to more normal wider euro area trends as global price pressures stabilise, PwC reported.

The labour market in Ireland, while still resilient, is showing early signs of softening, with the CSO's seasonally adjusted unemployment rate rising slightly to 5% on an annualised basis in June 2026. PwC said this suggested that job creation is moderating from the exceptionally strong rates seen in recent years. Despite this, overall labour market conditions remain supportive of economic activity.

As noted by the Irish Credit Union Consumer Sentiment Survey in June 2026, consumer sentiment climbed to 62.2 in June. While this marks two straight months of improvement, it remains well below the long-term average of about 83.

Growth across Ireland’s key trading partners is expected to soften in 2026 before recovering gradually over the medium-term, reflecting the drag from higher energy and commodity prices, ongoing geopolitical uncertainty, and the lagged effects of earlier monetary tightening.

“Overall, Ireland’s economy remains resilient, transitioning to more moderate growth in 2027," said Ciarán Nevin, Economics Director, PwC Ireland. 

"Policymakers and businesses are navigating a more complex global environment, balancing the opportunities of a strong fiscal position with the risks posed by external uncertainties, inflationary pressures, and softening domestic momentum.”