The 2026 Budget is predicated on a slowdown in the economy; GDP growth is projected at 1.0% from a massively revised 10.8% this year, with employment growth slowing to 1.5% from 2.2% and consumer spending rising by 2.3% from 2.9%. Inflation is forecast to remain benign , at 1.9%.
The Government is finally acknowledging that the rise in the Corporation tax rate to 15% will boost revenue, by a forecast €3bn, bringing total Corporation tax receipts to €34bn or 31% of total tax revenue. Total current revenue rises by just €1bn while net current spending increases by €7.5bn,with voted spending up by 9%. As a result the current budget surplus falls to €22.7bn from €29.2bn this year. Tax bands and credits are unchanged so with wage growth there will be a net increase in the real tax burden for many, but at this stage of the electoral cycle the Government has chosen spending rather than tax reductions.
This year also saw a big increase in capital spending, to €25bn, including €5.5bn additional spending as part of the National Development plan. No such commitment is included for 2026, so capital spending actually slows to €20bn. The Government also plans to add €2bn to the Infrastructure Fund and €4.5bn to the Future Ireland Fund , with the overall capital deficit projected at €24.6bn, so leading to a small Exchequer deficit of €1.8bn.
The Funds transfer is netted out in the General Government figures which also includes a surplus on the Social Insurance Fund, so the General Government balance remains in surplus, at €5.1bn, albeit half the expected figure for 2025. Total gross debt is forecast to be largely unchanged in 2026, at €211bn, which alongside the modest rise in GDP results in a further fall in the debt ratio, to 32.3%
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The Irish Economy- Forecasts and Analysis