The Irish economy, as measured by gross domestic product (GDP), is forecast to decline in 2026, according to the European Commission Spring's 2026 Economic Forecast.
This is mainly due to the effects of the frontloading of pharmaceutical exports in 2025.
The EU has forecast that Irish GDP will contract by 1.2% this year, after surging 12.3% last year.
But the Irish economy will then stabilise and turn positive in 2027 with growth of 3.4%, the EU has predicted.
The EU said that growth in the domestically driven economic activity is expected to continue, but it added that the energy price shock is expected to push Irish inflation higher, weighing on real income and growth.
The Commission has predicted an inflation rate of 3.5% for this year, up from 2.1% in 2025. But it has forecast that it will fall back to 2.6% in 2027.
Meanwhile unemployment, which came in at 4.7% in 2025, is set to rise to 4.8% in 2026 and 4.9% in 2027.
"The outlook for public finances is positive but marked by significant risks to corporation tax revenues," the EU added.
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