A Concentrated Tax Base and Rising Expenditure: Fiscal Risks in Ireland's Medium-Term Outlook

Laura Boyd, Thomas Conefrey, Ronan Hickey, Matija Lozej, Niall McInerney, Radek Šauer and Graeme Walsh
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Laura Boyd: Central Bank of Ireland
Thomas Conefrey: Central Bank of Ireland
Ronan Hickey: Central Bank of Ireland
Matija Lozej: Central Bank of Ireland
Niall McInerney: Central Bank of Ireland
Graeme Walsh: Central Bank of Ireland

Quarterly Bulletin Articles, 2026, 2-41

Abstract: The economy has grown rapidly since 2021, faces capacity constraints and is subject to significant externally driven inflationary pressures. Government fiscal policy has been procyclical in recent years with net expenditure growing at an annual average rate of 9 per cent, almost twice the estimated nominal growth potential of the domestic economy. As a result, on a real per capita basis, spending is estimated to have increased by 15 per cent between 2019 and 2025, compared to growth of 11 per cent for the euro area. With the economy operating at capacity and inflation rising, fiscal policy should avoid unnecessarily stimulating demand at present.

Date: 2026-06
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