Bank of Ireland forecasts 3.5% economic growth for 2026

The Irish economy is projected to expand by 3.5% this year and 2.5% in 2027, according to Bank of Ireland's latest forecasts. This domestic growth outlook contrasts with a predicted 3% contraction in Gross Domestic Product, which includes multinational activity. The GDP dip is attributed to the unwinding of a surge in pharmaceutical exports experienced in 2025.

In the housing sector, Bank of Ireland anticipates a significant increase in construction, with nearly 40,000 homes expected to be completed this year, up from 36,000 in 2025. Projections suggest this will rise further to 42,000 homes in 2027. Despite this rise, the figures remain below the estimated 50,000 to 60,000 homes needed annually to meet demand.

“

We expect housing completions to rise to 39,600 this year and 42,000 in 2027.

Inflation forecasts have been revised downward, with the bank now expecting it to be 3.1% this year and 2.7% next year. This adjustment is partly due to oil prices trading around $90 per barrel, down from their peak following the Iran war. The phased withdrawal of government supports also contributes to the inflation outlook.

Job creation is showing signs of flattening, with employment forecast to grow by 1.1% this year and 1.5% in 2027. The bank highlights Ireland's construction sector as poised for strong growth, outperforming 19 other European countries over the next two years. This is supported by activity in non-residential and civil engineering projects, as well as foreign direct investment benefiting from the development of weight loss drugs and AI-driven investments in data centers.

“

Eli Lilly and Novo Nordisk have both recently expanded their facilities in Ireland. Machinery and equipment spending was up 17% year-on-year in the first quarter of 2026, helped by AI-related investment in data centres. Intel announced a €5 billion investment in its Irish plant in response to ongoing demand for semiconductors.