Budget 2027 is set against heightened geopolitical uncertainty, but exceptional fiscal surpluses. The starting point is a nearly €6.7bn surplus (1.9% of GNI*) in 2026. The budget surplus is forecast to be €9.5bn in 2027 (2.5% of GNI*). However, excluding windfall corporation tax receipts, the Government will run a significant underlying deficit of €13.4bn in 2027 (-3.5% of GNI*).

Irish manufacturing activity remained strong in September, with the PMI edging up to 55.5 as output and new orders continued to grow, including export orders. Traditional industrial production also strengthened, rising 4.4% in the three months to August and 0.8% year-on-year.

The September meeting of the US Federal Reserve Open Market Committee (FOMC) saw the central bank deliver a 25bps rate hike. The target range for the Fed funds rate was raised to 3.75-4.00%. The policy change was widely anticipated and the FOMC was unanimous in its decision. It marked the first rate change from the Fed in six meetings.

The ECB’s Governing Council meeting for September saw the central bank raise its key interest rates by 25bps. The deposit and refi rates were increased to 2.50% and 2.65%, respectively. This was very much in line with expectations and was fully priced-in. It marks the second 25bps rate hike from the ECB this year. It previously increased rates by 25bps at its June meeting and then kept rates unchanged in July.

The September meeting of the Bank of England’s Monetary Policy Committee (MPC) saw the central bank continue to leave the Bank Rate unchanged, at 3.75%. This was in line with market expectations. It marks the sixth successive meeting where the central bank has been on hold.

• Economic picture has been robust in the face of geopolitical shcoks, but ongoing energy shocks brings risks to the outlook
• US economy continues to outperform, with Eurozone and UK dented by higher energy prices and policy uncertainty

The global economy started 2026 on a strong footing. Indeed, US tariffs have not escalated to the extent expected post ‘Liberation Day’ in April 2025, and some measures were struck out, at least temporarily, by the US Supreme Court in early 2026. A key driver of this resilience has been the surge in AI-related investment, particularly in the US. 

Foreign Currency and Interest Rates from 2025

The Irish residential property market remains defined by tight supply as 2025 draws to a close. However, over the course of the year, there have been some encouraging signs in the suppy dynamics, albeit the outlook remains challenging. 

This Budget is set against an uncertain economic backdrop so far this year. GDP growth was robust in the early part of the year but has since moderated. The Chancellor had committed to not raising taxes materially further following last year’s hikes to national insurance (NI) on employer contributions, which among other measures raised £40bn. While the tax rises are largely to fill the hole in the fiscal rules, there are also net spending increases in the budget