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Recent Budget decisions are set to lead to a fall of around 1.3 percent in disposable incomes for many households, according to new analysis from the Economic and Social Research Institute. The ESRI suggests the impact will be felt most acutely by middle and higher income earners, following the freezing of income tax credits and bands alongside the withdrawal of temporary cost of living supports.

While much political focus has centred on headline tax and welfare measures, the ESRI’s assessment highlights how the cumulative effect of policy choices can quietly erode take home pay. From an accounting perspective, this underlines the importance for households and businesses alike of reviewing cash flow projections rather than relying on assumptions that incomes will broadly hold steady year on year.

The Institute’s latest economic forecast paints a picture of continued growth, though at a more moderate pace. Employment is expected to expand more slowly, with the unemployment rate forecast to edge up from 4.8 percent this year to 5.2 percent by 2026. Domestic economic growth is projected at 2.1 percent next year, down from an estimated 4 percent in 2025. The ESRI is clear that this does not point to an underlying slowdown, instead reflecting a surge in investment activity during 2025 that is unlikely to be repeated at the same scale.

On a broader measure, Gross Domestic Product is forecast to grow by 13.1 percent this year and 5.7 percent next year. This strong performance is linked to a spike in exports ahead of the introduction of US tariffs, a factor that is now easing. For policymakers and advisers, this raises questions about how sustainable headline growth figures truly are when driven by timing effects rather than ongoing domestic demand.

Housing supply remains a major concern. The ESRI expects 35,000 homes to be completed this year, rising to 36,000 in 2026. However, economist Conor O’Toole has reiterated that annual output of more than 50,000 homes would be required to meet underlying demand. This gap has implications for affordability, workforce mobility and long term economic stability.

The report also examines the potential impact of artificial intelligence on the Irish economy. Given Ireland’s reliance on multinational firms, the ESRI argues the risks may be greater here than elsewhere. Large scale investment in AI could lead to labour replacing technologies, affecting employment levels. There is also a warning that any sharp reversal in AI investment could trigger cutbacks by technology companies, with knock on effects for jobs and corporation tax receipts.

On climate policy, the Institute notes evidence of a decoupling between economic activity and emissions in industry, though progress in the transport sector remains limited. Finally, the ESRI has repeated its concerns about growing dependence on volatile corporate tax revenues, alongside what it describes as a loosening of fiscal policy that may not align with current economic conditions.

For businesses and households, the message is clear. Strong headline growth does not remove the need for prudent planning, realistic forecasting and professional advice.

Disclaimer: This article is based on publicly available information and is intended for general guidance only. While every effort has been made to ensure accuracy at the time of publication, details may change and errors may occur. This content does not constitute financial, legal or professional advice. Readers should seek appropriate professional guidance before making decisions. Neither the publisher nor the authors accept liability for any loss arising from reliance on this material.