The Northern Ireland economy is forecast to record some growth this year and next, albeit against a more challenging backdrop as heightened geopolitical tensions, trade headwinds and higher energy costs weigh on the global economy, according to the latest EY Economic Eye Spring forecast. In the Republic of Ireland, growth is also expected to continue this year and in 2027, although at a slower pace than the exceptional performance of 2025. The EY forecast expects the domestic economy to perform solidly, supported by ongoing jobs growth and consumer spending, although inflation is now expected to tick up as a result of the conflict in the Middle East.
Northern Ireland: Growth amid challenging conditions
The Northern Ireland economy started 2026 with PMI data pointing to expanding private sector activity. However, rising fuel prices, Middle East tensions and a changed US tariff landscape are adding cost pressures and uncertainty. Higher inflation is squeezing household purchasing power and has shifted the monetary outlook, with the Bank of England now expected to keep interest rates on hold for the time being while public finances remain tight. Reflecting these constraints, EY’s Economic Eye forecast is for growth of 0.7% in 2026, before an acceleration to 1.3% in 2027, while jobs are expected to grow at 0.6% in both years.
Rob Heron, Managing Partner at EY Northern Ireland, says:
“Northern Ireland’s economy continues to show resilience, but growth is increasingly constrained by global volatility, impacting costs, confidence and investment decisions. Understanding how global tensions, trade arrangements and policy choices affect local businesses is becoming more important for business leaders and policymakers in Northern Ireland as they plan for the future.”
Ireland: Growth moderates but consumer spending and job creation continue
After the exceptional economic performance in 2025, economic growth in Ireland is expected to moderate over the forecast period. EY now projects GDP growth of 1.8% in 2026 and 4.2% in 2027, with Modified Domestic Demand forecast to rise by 2.7% in 2026 and 2.5% in 2027.
Household consumption is expected to remain a positive contributor to growth, supported by rising wages and a strong employment base, with EY forecasting growth of 2% this year and 2.3% next year, although higher energy costs and global uncertainty are likely to temper spending decisions.
The Irish labour market remains healthy, with a record 2.83 million people in employment in the fourth quarter of 2025 and income tax receipts indicating that hiring continued in the first quarter of 2026. EY expects employment growth to ease over the forecast period to 1.8% in 2026 and 1.6% in 2027, reflecting softer economic momentum and more cautious hiring intentions. While the unemployment rate is projected to edge up slightly, it is expected to remain low by historical standards at 5% in 2027.
The escalation of the Middle East conflict has adversely affected Ireland’s inflation outlook. EY forecasts that the headline rate will rise from 2.2% last year to 3.1% this year, as the second global energy shock of the decade puts upward pressure on prices. While some price pain is already being felt by households and businesses, the inflationary shock to date is less severe than the Ukraine invasion. However, energy prices remain a key downside risk to growth, with the duration of the conflict likely to strongly influence the impact on both the Irish and global economy.
EY’s latest projections show world growth easing to 2.8% in 2026, from 3.4% in 2025, while Euro area inflation runs ahead of target, averaging 2.8% this year before falling to 2.2% in 2027.
Dr Loretta O’Sullivan, Chief Economist at EY Ireland, says:
“If 2025 was the year of US tariff uncertainty, then 2026 is the year of global energy volatility. Having navigated the former well, the Irish economy is now being challenged by the latter. Last year saw a very strong performance by the Irish economy, beating all forecasts, and it is only to be expected that this would unwind somewhat in 2026.
Combined with the impact of the conflict in the Middle East on the global energy market and the world economy, we are projecting more moderate but still decent growth this year, something many of our peer nations will not be expecting.
Consumer spending is a key indicator of the health of the domestic economy and even with the significant energy price impact we are still forecasting this to increase this year and next.”
Resilience takes centre stage
The Spring 2026 EY Economic Eye highlights resilience as a defining theme across the economy, as businesses and policymakers respond to a more fragmented and volatile global environment. Organisations are having to deal with heightened geopolitical risk, supply chain disruption and changes in global trade. The report points to vulnerabilities across digital systems, energy markets and infrastructure capacity, with geopolitical developments increasingly influencing costs, investment decisions and operational priorities.
Digital resilience is becoming more important as businesses accelerate technology adoption, including the use of AI, creating opportunities to enhance productivity, efficiency and decision‑making. Energy resilience also remains a key focus, with investment in security of supply and sustainability supporting greater cost certainty and long‑term competitiveness. At the same time, strengthening infrastructure resilience presents an opportunity to unlock productivity gains, support innovation and enable future growth across the economy.
Carol Murphy, EY Ireland Head of Markets, says:
“In today’s volatile environment, businesses are navigating conflict on three interlinked fronts, with military, economic and technological challenges directly shaping commercial and strategic decisions. For organisations, geopolitics is no longer an intangible risk, it’s directly influencing strategy, supply chains, investment, talent and resilience in real time.
For leadership teams, the challenge is less about predicting what happens next and more about building the agility and capability to act when conditions change. For policymakers, building resilience across the economy will be central to helping Ireland navigate today’s uncertainty and remain an attractive and trusted place to invest, innovate and do business.”
