21st Apr 2026 15:28
(Alliance News) - Ireland's government on Tuesday warned of a rising risk of stagflation – high inflation coupled with low economic growth – as the Middle East war and US tariffs weighed on the outlook.
Finance Minister Simon Harris said the eurozone member's economy nonetheless had "fiscal resilience" at a challenging time, as the Irish government published its Spring forecasts.
The government expects economic growth of 2.1% this year and three percent in 2027, supported by continued strength in the labour market and domestic demand.
However, it cautioned that a combination of weaker global growth and persistent inflation could create stagflationary pressures.
Soaring energy prices as a result of the Mideast war are expected to hike overall inflation for countries worldwide.
The government expects inflation of 3.3% this year, almost double its 1.8% forecast at the end of last year.
Harris meanwhile stressed that the latest forecasts "were calibrated on the assumption of a short and relatively contained conflict, with limited lasting damage to energy infrastructure in the Gulf".
In the most severe scenario, growth slows sharply but remains positive, while inflation stays elevated for longer, eroding household purchasing power and complicating fiscal policy choices, the government said.
Strong corporation tax receipts have bolstered Irish public finances in recent years, but the government on Tuesday reiterated concerns about their volatility.
source: AFP
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