Ireland: Staff Concluding Statement of the 2026 Article IV Mission
IMF News, May 25, 2026
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- Published: May 25, 2026
Overview and key findings
- Date: May 25, 2026.
- The Irish economy has maintained strong performance despite trade and geopolitical tensions and elevated uncertainty.
- Given Ireland’s structural vulnerabilities and rising global unpredictability, current resilience “cannot be taken for granted.”
- Policy emphasis: prioritize temporary and targeted measures for vulnerable groups in response to the war in the Middle East, and avoid broad-based measures such as tax cuts, subsidies, and price controls.
- The mission identifies three broad policy priority areas: Fiscal, Financial, and Structural.
Outlook and risks
- Baseline projection assumptions: consistent with the energy futures prices as of May 12th and the IMF April 2026 World Economic Outlook reference scenario.
- Growth projections:
- Modified domestic demand growth is projected to moderate from almost 5 percent in 2025 to about 2½ percent in 2026-27.
- Inflation projections:
- Headline inflation is projected to rise to about 3½ percent on average this year and return to 2 percent around 2028.
- Risks:
- Downside risks to growth and upside risks to inflation remain significant.
- External risks stem from the war in the Middle East; impacts depend on intensity and duration of the energy price shock.
- High reliance on multinational enterprises (MNEs) is a structural vulnerability.
- Geoeconomic fragmentation and elevated policy uncertainty could trigger supply-chain and capital flow shifts harmful to Ireland’s globally integrated economy.
- Rapidly evolving AI landscape poses novel risks (cybersecurity threats, possible market corrections if AI-driven productivity expectations are revised) and upside potential (productivity gains).
- Domestic supply-side constraints in infrastructure, housing, and labor markets could weigh on productivity.
Fiscal policy — assessment and recommendations
- Overall stance:
- A broadly neutral fiscal stance is appropriate in the near and medium term.
- The fiscal stance in 2025-26 is assessed to be moderately expansionary.
- Achieving a broadly neutral fiscal stance from 2027 onwards requires staying within the expenditure ceiling path in the Medium-Term Fiscal Structural Plan (MTFSP).
- Public investment and current expenditure:
- Support the planned scale-up of public investment to close housing and infrastructure gaps and to crowd in private investment.
- Closely control current expenditure growth and minimize spending overruns; health and social spending have repeatedly exceeded budget allocations.
- With the economy operating at full capacity and upside inflation risks, fiscal policy should avoid injecting unnecessary stimulus and prevent boom-bust dynamics.
- Fiscal responses to shocks:
- In a downside scenario of moderately lower growth and higher inflation: allow automatic stabilizers to work fully; any additional discretionary support should be time-bound, targeted and maintain the price signal. A broadly neutral fiscal stance would remain appropriate.
- In a severe scenario with sharp growth slowdown: Ireland has fiscal space to scale up discretionary targeted support and accommodate higher deficits temporarily while deepening reforms for long-term fiscal sustainability.
- Expenditure control measures:
- Strengthen expenditure controls via the Comprehensive Review of Public Financial Procedures, tighter in-year monitoring, earlier intervention, and corrective actions.
- Support the Expenditure Control and Escalation Process and upstream measures (commitment control over procurement, enhanced digitalization and integrated platforms/data).
- Emphasize binding budget planning targets to limit expectations of additional appropriations.
- Implementation of infrastructure plans:
- Effective implementation of the Accelerating Infrastructure Action Plan is key; address planning and judicial review bottlenecks.
- Support reforms to cap costs of environmental planning judicial reviews, streamline court procedures, shorten consent procedures, and eliminate dual approval processes for critical infrastructure projects.
- Revenue and tax-base broadening:
- Broadening the tax base recommended to reduce reliance on highly concentrated corporate income tax (CIT) revenues and to channel more excess CIT into the two savings funds.
- Options include increasing local property tax rates; reducing the number of preferential VAT or excise rates (especially those benefiting higher-income earners); reducing broad-based personal income tax (PIT) reliefs and exemptions.
- Consider introducing additional PIT bands with appropriately calibrated rates and replacing the Pay Related Social Insurance and Universal Social Charge thresholds with gradual phase-ins to strengthen work incentives; mitigate regressivity with means-tested transfers.
- Strengthening the national fiscal framework:
- Recommend adopting a credible and binding fiscal rule, preferably anchored in a long-term net debt target, operationalized through multi-year net expenditure ceilings.
- Advise legislating the national fiscal framework and assigning the IFAC a central role.
- Recommend the MTFSP guide annual budgets and act as a binding mechanism on spending ceilings over the medium term.
Financial sector policy — assessment and recommendations
- Systemic environment:
- Systemic risks have risen amid tightening global financial conditions and a volatile external environment.
- Global tightening reflects markets pricing in higher inflation, slower growth, and negative sentiment; risks concentrate largely in large non-bank financial institutions (NBFI).
- Equity valuations appear stretched, raising concerns about abrupt corrections and mispricing of risk.
- Domestically, concentration risks persist due to reliance on a small set of globalized sectors; digitalization, cyber threats, and reliance on external providers add complexity.
- Banking sector:
- Banking sector remains resilient: profitability moderated but remains above pre-pandemic levels; capital positions strengthened and are above regulatory requirements; liquidity is sound; asset quality has continued to improve.
- Vulnerabilities persist in leveraged finance to firms and the commercial real estate sector.
- Supervisory focus should keep asset quality under close watch given macro risks and geopolitical escalation risks.
- Evolving risks from digitalization and cybersecurity, accelerated by developments in frontier AI models, require ongoing attention.
- Monitor the impact of the EU's Sixth Capital Requirements Directive (CRD6) on non-EU banks and implications for EU banks’ business models and cross-border activity.
- Macroprudential policy:
- Current settings remain appropriate; the Central Bank of Ireland (CBI) should stand ready to adjust them if conditions worsen.
- The counter-cyclical capital buffer (CCyB) rate is maintained at 1.5 percent — a level consistent with cyclical risk conditions being neither elevated nor subdued.
- Recommend continued stress testing and review/adjustment of macroprudential settings as warranted; consider use of releasable capital buffers if downside risks impair credit provision.
- Non-bank financial sector (NBFI):
- Strengthen regulation and supervision of non-banks; this is a key priority for the CBI.
- Continue engagement with international community, ESMA, and other NCAs; monitor implementation of macroprudential measures for Irish property funds and GBP-denominated liability-driven investment funds.
- Maintain leadership in developing a macroprudential framework for non-banks and improve data availability/quality to enable system-wide stress tests.
Structural policy — assessment and recommendations
- Housing supply:
- Persistent housing shortages require renewed efforts to boost supply.
- Progress noted (pickup in housing completions; shift toward higher density) but achieving new housing targets requires further reforms, including streamlining planning and judicial review processes.
- Enhance apprenticeship and training programs to alleviate construction sector skill shortages; crowd in private capital via planning certainty and infrastructure.
- New Rent Control Framework introduces predictability and flexibility for rentals; IMF recommends removing rent controls to further boost rental supply while continuing to support vulnerable households.
- Energy security and green transition:
- Sustained productivity growth requires reliable and competitively priced low-carbon energy.
- Electricity infrastructure bottlenecks impede investment and growth; government has prioritized grid upgrading.
- Meeting energy demand (including rapidly growing AI-related needs) requires additional generation, reinforced infrastructure, and broader carbon pricing coverage.
- Strengthening integration with the EU energy market, including the grid, is key to bolstering security of supply.
- Ireland has immense potential for offshore renewable energy; harnessing this alongside improved transmission and storage is crucial for energy security, competitiveness, and a cost-effective green transition.
- Labor market and AI:
- Ireland is relatively more exposed to AI because of concentration in ICT, financial services, and knowledge-intensive industries.
- Realizing AI productivity gains requires continuous reskilling and upskilling; labor demand will shift toward advanced digital and analytical skills.
- Reforms to foster innovation and growth, policies to help workers adapt and acquire new skills, and enhanced labor mobility (including through affordable housing) are recommended to protect inclusive growth.
- Deepening the EU Single Market:
- A more integrated EU Single Market would allow Irish firms to expand with fewer frictions, leverage economies of scale, and boost financing for start-ups.
- Deeper integration would enhance resilience to supply-chain and trade shocks, and new EU trade agreements would help diversify supply chains.
- The Savings and Investments Union could facilitate redirection of savings into productive investments and increase household wealth and resilience.
- Ireland’s financial sector is well-positioned to lead in asset management; the proposed 28th corporate regime, if well designed and implemented, could improve Irish firms’ efficiency in the Single Market.
- Simplifying regulations and creating a single set of rules would facilitate deeper integration, cross-border activity, and economies of scale.
Concluding policy priorities (concise bullets)
- Fiscal:
- Achieve a broadly neutral fiscal stance; accelerate public investment while controlling current expenditure growth and minimizing spending overruns.
- Broaden the tax base to reduce reliance on highly concentrated corporate income tax.
- Strengthen the national fiscal framework and budget credibility (legislate a credible, binding fiscal rule, preferably anchored in a long-term net debt target; assign IFAC a central role; use MTFSP as a binding guide).
- Financial:
- Maintain close monitoring of financial stability risks; stand ready to adjust macroprudential settings (CCyB at 1.5 percent) as warranted.
- Continue strengthening regulation and supervision of the non-bank financial sector and address data gaps.
- Structural:
- Boost housing supply (streamline planning/judicial review, enhance skills, crowd in private capital, reassess rent controls).
- Enhance energy security and stay the course on the green transition while integrating further with the EU energy market.
- Prepare workers for AI through reskilling/upskilling and policies to support labor mobility.
- Support deepening of the EU Single Market to increase resilience, scale, and financing opportunities.
IMF staff concluding statement following the 2026 Article IV mission to Ireland (May 25, 2026).