The Department of Finance (DFIN) has published the Annual Progress Report (APR) for 2026. The APR is a legal requirement under EU law and is part of the reformed European fiscal architecture. The APR’s main purpose is to assess government expenditure growth against planned expenditure, and to provide an update on the Government’s Medium Term Structural-Fiscal Plans.
The APR highlights a resilient macro-fiscal position, but one increasingly exposed to external shocks and structural vulnerabilities including the concentration of corporation tax receipts. The Department of Finance projects GDP growth of 3.1 percent in 2026 and 3.5 percent in 2027, with Modified Domestic Demand (MDD) expanding by a modest 2.1 percent this year as higher energy costs dampen consumption. Inflation has re-emerged as the dominant near-term risk, rising to 3.3 percent in 2026 due to geopolitical-driven energy price shocks, before easing to 2.5 percent in 2027 under baseline assumptions.
From a fiscal perspective, Exchequer deficits of €1.2 billion for 2026 and €3.4 billion for 2027 are forecast. However, there is in fact an underlying general annual government surplus of circa €9 billion. The divergence reflects transfers to long-term savings vehicles (Future Ireland Fund and Infrastructure, Climate and Nature Fund), which are neutral on a general government basis but materially impact Exchequer metrics.
Total tax receipts are projected at €110.8 billion in 2026 and €116.3 billion in 2027, with corporate tax expected to contribute €35.3 billion and €37.4 billion respectively. Corporate tax continues to account for roughly one-third of revenues, supported partly by global minimum tax reforms. At the same time, the reliance on corporation tax receipts is explicitly flagged in the report, with over half derived from a small cohort of multinationals. Income tax (€38.9 billion) and VAT (€23.6 billion) show steady growth in 2026, while excise receipts decline due to temporary policy measures aimed at cushioning energy costs.
Medium-term projections underline a structural issue: despite headline surpluses and declining debt (to 58 percent of GNI* in 2026), the State runs an underlying deficit exceeding €10 billion, once volatile corporate tax receipts are stripped out. Therefore, the key risks for the Exchequer stem from corporate tax sustainability, energy-driven inflation, and geopolitical fragmentation, alongside emerging tax base implications from AI-driven productivity shifts.
Commenting on the publication, Tánaiste and Minister for Finance, Simon Harris said:
“The international environment is highly uncertain it is important to be clear about where Ireland stands today. We are entering this period from a position of strength. Our labour market is operating at full employment, domestic demand has continued to expand, and the public finances remain in a relatively healthy position.
While risks to the outlook are significantly tilted to the downside, this Government will continue to respond in a way that is decisive and responsible, and in a way that supports the long-term resilience of our economy”
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