Bank of Ireland has forecast that the domestic economy will expand by 3.5% this year and 2.5% in 2027.
It also expects just under 40,000 homes will be built this year up from 36,000 completed last year.
The bank says the measure of the economy which includes the multinational activity, Gross Domestic Product, will fall by 3% this year as the surge in pharmaceutical exports which was experienced in 2025 unwinds.
It has revised downwards its forecast for inflation for this year as oil prices trade at around $90 per barrel down from their peak of almost $118 after the Iran war broke out.
Bank of Ireland says the phased withdrawal of Government supports means inflation will be 3.1% this year and 2.7% next year.
The bank also says job creation is flattening off and employment is forecast to grow 1.1% this year and 1.5% in 2027.
“We expect housing completions to rise to 39,600 this year and 42,000 in 2027,” Conall Mac Coille, Bank of Ireland’s chief economist, says in the bank’s revised economic forecasts.
Many observers believe between 50,000 and 60,000 homes need to be built annually to satisfy the demand for accommodation.
Mr Mac Coille adds Ireland will have the fastest growing construction sector among 19 European countries over the next two years with strong output in non-residential and civil engineering activity.
He says that foreign direct investment is benefiting from development of weight loss drugs and the AI driven investment cycle.
“Eli Lilly and Novo Nordisk have both recently expanded their facilities in Ireland. Machinery and equipment spending was up 17% year-on-year in the first quarter of 2026, helped by AI-related investment in data centres. Intel announced a €5 billion investment in its Irish plant in response to ongoing demand for semiconductors,” he notes.
