Government predicts €1.2bn budget deficit and says inflation could reach 6.7% in 2026

Department outlines scenarios showing energy disruption could push prices higher, with economic risks weighted toward downside pressures

Public expenditure minister Jack Chambers and Tanaiste and finance minister Simon Harris. Picture: Bairbre Holmes/PA Wire

The department of finance is predicting a €1.2bn budget deficit in 2026, and forecasts inflation peaking at 6.7% as part of a worst case scenario if the war in the Middle East continues.

As part of its annual progress report and spring economic forecast, the department outlined three scenarios, depending on the depth and duration of the conflict.