The Department of Finance and the Department of Public Expenditure, Infrastructure, Public Service Reform and Digitalisation have jointly published the Annual Progress Report 2026. The report outlines the latest forecasts and assesses the current state of the economy, with the Government warning that heightened geopolitical risks and disruptions to global energy supplies now pose a significant threat to inflation, growth and the public finances.
The report outlines three scenarios—baseline, adverse and severe—with projections that vary depending on geopolitical issues such as the depth and duration of the conflict in the Middle East. Under the baseline scenario, inflation is projected to average 3.3 percent this year, an increase of 1.4 percent compared to the autumn forecasts. Modified Domestic Demand (MDD) is projected to increase by around 2 percent this year before accelerating to 3 percent next year.
In the adverse scenario, inflation is projected to rise to 3.7 percent in 2026. Inflation moderates somewhat thereafter, but remains elevated in 2027, averaging close to 3.5 percent next year.
In the severe scenario, average annual inflation is projected to be 4.6 percent in 2026, with end year inflation rates significantly higher, potentially reaching 6.5 percent in the final quarter. While inflation begins to ease in 2027, it remains elevated and averages just over 5.3 percent.
Tax revenue is projected at €110.8 billion this year with nearly one-third expected to come from the corporate sector. The corporation tax forecast reflects additional revenues generated from the higher rate of corporation taxation applied to the profits of firms with annual turnover in excess of €750 million, reflecting global corporate tax policy changes.
Commenting on the publication, Tánaiste and Minister for Finance, Simon Harris said
‘This year’s Annual Progress Report is being published at a time of considerable global uncertainty. Recent developments in the Gulf have resulted in significant disruption to global energy markets, and while efforts towards de‑escalation are welcome, the situation remains volatile. The turbulence in the international environment is a reminder of the importance of keeping our approach to overall budgetary policy balanced and sustainable across the medium-term. Looking ahead, policy formulation for Budget 2027 will take place over the summer, and the appropriate fiscal policy will be considered as part of the Summer Economic Statement.
Given the elevated level of uncertainty, it is important to stress that our assessment published today is more akin to a scenario analysis; my officials will, of course, continue to monitor incoming data and developments and update numbers accordingly.’
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