Fresh forecasts out today (Tuesday, April 21) reveal where Ireland’s economy stands — and the risks looming on the road ahead.

Tánaiste Simon Harris and Minister Jack Chambers today published the Government's Annual Progress Report for 2026.

The Annual Progress Report (APR) is stated as being "an important milestone in Ireland’s annual economic and fiscal cycle" and forms a central part of Ireland's engagement with the European fiscal framework.

The APR sets out the Department of Finance’s latest macroeconomic and fiscal forecasts for the remainder of the decade.

This provides an evidence-based assessment of where the Irish economy stands today and the risks the economy faces into the future.  The publication of this APR comes at a time of heightened global uncertainty and a spike in fuel prices caused by the war in the Middle East.

It sets out three different scenarios - baseline, adverse and severe - the projections under which differ depending on factors such as the depth and the duration of the conflict.

Economic statement

Tánaiste and Minister for Finance, Simon Harris highlighted: "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.

"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" he concluded.

Meanwhile the Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation, Jack Chambers said: "Ireland has weathered several challenges over recent years and the economy continues to perform strongly with further growth projected across different scenarios.

"To ensure that we are in a position to continue to deliver on capital investment and public services, it is important we implement our fiscal policy as set out in the Medium-Term Plan".

Farming sector

The Government has decided to increase the Government Expenditure Ceiling for this year by €0.7 billion to €118.5 billion.

This reflects the Government’s response to global economic developments and the impact of increased fuel costs included in the agreement of a package of measures to support the transport, farming and fisheries sectors facing increasing energy prices this month.

By reducing the excise duty payable on both petrol and diesel, the Government has "dampened the pass-through from higher wholesale price to retail prices."

The report states "this burden-sharing has been complemented by other support mechanisms, including an extension of the fuel allowance season and targeted measures for the most exposed sectors."

The total budgetary cost of these measures is €750 million this year.

The key figures

A general government surplus of €9.2 billion is expected this year;
Tax revenue is projected to be €110.8 billion in 2026. (Nearly one-third (€35.3 billion) of this revenue stream is sourced from the corporate sector);
Consumer price inflation (HICP) is set to average 3.3% this year, approximately 1.5 percentage points higher than assumed in the Department’s autumn forecasts;
Modified Domestic Demand (MDD) is projected to increase by just over 2% this year, and by a further 3% next year;
Consumer spending is projected to grow by 2% this year – a downward revision of 0.3 percentage points relative to the autumn forecasts;
National income is projected to increase at an average rate of around 2.75% per annum between now and the end of the decade.

Energy prices

According the the Annual Progress Report:

Oil prices (Brent crude) are assumed to average around $83 dollars per barrel this year, falling to under $73 per barrel next year;
Wholesale gas prices are expected to average around £1.20 per therm for the rest of this year;
Gas prices are suggested to average around £0.90 per therm next year.

Taxes

The tax yield this year is projected at €110.8 billion, this is an increase of €5.1 billion (4.8%) relative to last year;
In terms of direct taxes, income tax receipts are forecast at €38.9 billion, an increase of €2.4 billion (6.5%);
Corporation tax is expected to yield €35.3 billion, an increase of €2.3 billion (7.1%);
On the indirect side, VAT receipts are forecast at €23.6 billion; this would be an increase of €0.7 billion (just over 3%);
Excise duties are projected at €6.2 billion; this is down on last year by €0.2 billion (3.6%), mainly reflecting the temporary reductions on wholesale oil prices to retail prices for petrol and diesel.

Budget balance

Data published by the Central Statistics Office (CSO) show that a headline budgetary surplus of €11.2 billion was recorded last year.

A general government surplus of €9.2 billion is expected for 2026.

While an Exchequer deficit of €1.2 billion, is in prospect for 2026.

For this year, general government revenue is projected at €153 billion and general government expenditure is projected at €143.8 billion.

Primary expenditure (total expenditure excluding debt interest payments) is estimated at €140.5 billion, with interest expenditure estimated at €3.3 billion this year.

Debt

Gross public indebtedness is projected to be €208.1 billion at the end of this year, equivalent to 58% of GNI.

This marks an important milestone as it will be the first time since 2008 that the debt-income ratio will be below 60%.

The debt-income ratio is projected to decline further over the forecast horizon, with "nominal economic growth doing much of the heavy lifting."

Global aspect

The APR stated that geoeconomic and geopolitical issues will "play a key role in shaping the Irish economy both this year and next."

While not a major export market, developments in the Chinese economy can have indirect effects on the Irish economy.

According to the report, the EU ran a trade deficit of more than €350 billion with China, with the ramping-up of Chinese exports sometimes referred to as the ‘second China shock’.

This is putting significant pressure on European firms, including in the automotive, green technology and advanced manufacturing sectors.

European firms face an uneven playing field:

They receive far less state support (IMF analysis estimates that State aid in China amounts to 4.4 per cent of GDP; the European equivalent is around 1.5 per cent);
Have more stringent regulations;

Face higher production costs than their Chinese competitors, leaving them vulnerable to sustained market share erosion.

Middle East conflict

The global economy is facing its second major energy price shock in less than five years.

"Similar to the price dynamics triggered by the Russian invasion of Ukraine, the current increase in energy prices reflects supply-side developments", according to the report.

"In Ireland and the rest of Europe, the imbalance between demand and supply is reflected in higher energy prices; in parts of Asia, the imbalance is reflected in the rationing of energy", the APR outlined.

The report warns that "by-products from refining oil and LNG (including ammonia, urea, helium) are in short supply, and this demand-supply imbalance could pass-through to non-energy prices (notably food prices) as higher input costs work their way upstream."

The report also details that "around one fifth of global oil and LNG supplies transit through the Strait.

"The closure of this ‘choke point’ prompted a 60% increase in the wholesale price of oil in March, the largest monthly increase in decades", the report acknowledged.

While energy commodity prices are the main channel through which global economic activity is being affected, the report details "spillovers to other supply-chains appear inevitable with around one-third of the world’s fertiliser transiting through the Strait."

The report also states that "as a net energy importer, the euro area is particularly exposed to the terms-of-trade shock, and the higher energy import bill is set to weigh on activity this year."