Ireland is being pulled in two directions by the global economy, the Economic and Social Research Institute (ESRI) has warned.
On the one hand Ireland is benefiting from a surge of investments in artificial intelligence (AI) whilst, on the other, is at risk from the pressure on energy prices as a result of the conflict in the Middle East.
But the ESRI’s latest economic outlook, published today, says Ireland’s economy continues to grow despite the heightened international uncertainty.
For now.
On the positive side, global spending on AI-related infrastructure has risen sharply.
Investment in the software, hardware and energy production required to support the technology is already contributing to Irish investment and export growth, according to the institute.
But the ESRI warns that the rapid expansion also creates risks.
If the returns expected from AI investment fail to materialise, large multinational companies could face negative shocks, with consequences for Irish output – meaning potential job losses and a drop in tax revenues.
“The economy continues to perform well, but we remain concerned about some troubling international trends,” said Alan Barrett from the ESRI in Dublin.
“AI investments are providing a positive boost to the global economy, but there are risks here too, for example, if returns on the investments disappoint.”
The opposing pressure comes from the escalating conflict in the Middle East, which has disrupted energy production and affected the Strait of Hormuz and now the Strait of Bab el-Mandeb too.
Oil and gas futures have risen sharply, increasing the risk of higher costs for Irish households and businesses.
The ESRI forecasts consumer price inflation of 3.6 percent in 2026 and 3.3 percent in 2027. It expects modified domestic demand to grow by 2.6 per cent this year and 3.4 per cent next year.
“Despite rising energy prices internationally, as an open, globally connected economy, Ireland is well positioned to benefit from global AI tailwinds,” said Conor O’Toole, Research Professor at the ESRI.
However, he warned that Ireland’s dependence on multinational tax revenues leave it vulnerable if windfall receipts decline.
Housing also remains a major weakness, the ERSI warns.
It forecasts 39,200 new homes will be completed this year and just under 40,500 in 2027.
Ireland’s national housing plan, Delivering Homes, Building Communities, set a target of the construction of at least 300,000 new homes between 2025 and the end of 2030.