Irish economic growth to experience 'whiplash' effect through this year 

Ibec said the collapse of the US-Iran ceasefire less than three weeks after implementation began 'underlines the uncertainty running through the global economy this year'

Chief economist at Ibec Gerard Brady.

US tariffs and companies frontloading exports last year ahead of their implementation is expected to have a “whiplash” effect on Ireland’s 2026 growth figures, as renewed hostilities between Iran and the US is expected to drive up inflation again, a new economic forecast by business group Ibec has said.

Ibec is forecasting Irish gross domestic product to marginally grow this year at 0.9%, while domestic demand will grow by 3.3%. Exports are forecast to increase by 0.4% while import will increase by 2.4%.

While Ibec was forecasting inflation to run at 3.6% this year, the report was written before the resumption in hostilities between the US and Iran. The report noted the “continued re-opening is critical for the path of the global economy in the year ahead” but “any failure of that deal would materially raise our inflation forecast”.

In the event that hostilities resumed, Ibec forecast inflation to rise between 4.3% and 5.7% this year but that is predicated on oil prices averaging at or above $100 a barrel through the rest of the year.

Chief economist at Ibec Gerard Brady said the collapse of the US-Iran ceasefire less than three weeks after implementation began “underlines the uncertainty running through the global economy this year”.

“A continued failure to maintain the flow of physical products from the Gulf would materially raise our inflation forecast from its current 3.5% — which is already up from 2.4% at the start of the year.” 

However, he noted Ireland’s exports had remained “relatively resilient despite global volatility, which has been largely driven by US-imposed tariffs”.

“This volatility means it will be 2027 and beyond before we can fully understand the true impact of tariffs on Ireland’s exporting sectors. We expect exports, which grew by around 7.5% in 2025, to rise only marginally in 2026 as a consequence of this 'whiplash' effect. However, exports are projected to resume strong growth at 4% in 2027.” 

This reversal in exports is the main driver of slower GDP growth forecast for 2026.

New data from the Central Statistics Office (CSO) on Wednesday showed Irish exports dropped by almost a third in May as ongoing geopolitical uncertainty and last year's unique export surge to the US added to trade volatility.

The value of Irish exports of goods fell by €6.8bn in May compared to the same month last year, reflecting a drop of more than 29%. Exports to the US equated to almost 29% of total exports in the month, with €4.7bn worth of goods being sent across the Atlantic in May. That is despite exports to the US falling by 56% on an annual basis.

Goods sent to Britain, however, increased significantly, growing by over 26% in May compared to the same period in 2025 amid greater diversification by Irish companies to offset US trade volatility.

When it comes to AI-related trade, Ibec is expecting it to double over the next five years, with €6bn invested in information and communication equipment and software over the past 12 months.

The report said it was “not yet clear” where and how AI would deliver the “productivity returns needed to justify the incredible levels of investment seen globally” adding in Ireland adoption was “mixed”, with 20.2% of Irish firms reporting regular AI usage.

“AI adoption in Ireland is significantly higher amongst large firms, with usage rates of 58%, falling to just 17.2% for small firms. This leaves large enterprises in Ireland ahead of the curve in Europe, with small and medium Irish firms falling behind their peers,” the report said.