The impact of AI on the labour market is still not clear, but early signs show significant effects on trade and investment - Ibec

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• AI-related trade is on track to double over five years, with €6 billion invested in ICT equipment and software over the past 12 months.
• Future economic success is rooted in bold and purposeful decisions regarding ongoing technological changes. The Government should take action to utilise the National Training Fund to position Ireland as a frontrunner.
• US tariffs and front-loading will have a "whiplash" effect on 2026 growth figures

Ibec, the group representing Irish business, has published its latest Economic Outlook, forecasting domestic demand growth of 3.3% for 2026, while inflation is expected to land around 3.5% for the year. Despite significant global volatility impacting growth, AI-related investment, investment in public infrastructure, and resilient consumer spending are all set to support the economy.

While global trade continues to expand, the World Trade Organization (WTO) expects growth to slow from 4.6% in 2025 to 1.9% in 2026 due to the front-loading of goods ahead of anticipated tariffs. According to the Outlook, this shift has triggered a sharp "whiplash" effect that is particularly pronounced in Ireland, driven by the normalisation of its high-value pharmaceutical exports.

AI Investment & The Labour Market

Gerard Brady, Chief Economist and Head of National Policy said:

"We are seeing early evidence of the impact of AI on our economic figures. Total trade in AI-related goods to and from Ireland is on track to double over five years, now reaching €56 billion annually. Domestic investment in ICT equipment and software has risen to nearly €6 billion over the past 12 months- a 50% increase on the same period last year and a doubling from two years ago. Recent investment decisions will support this trend further. Within business, the impacts of AI on the competitive environment, investment, trade, and the labour market are very clear, and these figures will only grow over time.

Given that we are only at the foothills of understanding the impact of AI on our economy, the full picture has yet to emerge. We may not be at the forefront of developing new AI models, but early evidence suggests we have an opportunity to be a central node in AI-related supply chains. We also have a massive opportunity to be the country with the best-prepared workforce for the generational change in work and skills currently underway. However, our participation in lifelong learning hovers around the EU average, well below where we want to be for an open, global, and sophisticated economy.

Ireland’s current economic success has its roots in decisions taken to ensure we were investing to be at the forefront of new technological shifts in the global economy. That took bold and purposeful policy action. We have a tangible opportunity to get ahead of other countries because we have a large training fund, in the form of the National Training Fund- paid for by employers, with a €2 billion surplus. This cannot be left idle. This fund must be deployed to support the workforce transition, prepare us for change, and set Ireland up as a frontrunner in the emerging global economy."

The Impact of Trade Volatility

Gerard Brady added:

"The collapse of the US-Iran ceasefire less than three weeks after implementation began underlines the uncertainty running through the global economy this year. Reopening the Strait of Hormuz was necessary to prevent physical disruptions in global energy prices from fully translating into wholesale market pricing as transit stocks and reserves ran down. A continued failure to maintain the flow of physical products from the Gulf would materially raise our inflation forecast from its current 3.5% - which is already up from 2.4% at the start of the year.

On a positive note for Ireland, exports have remained relatively resilient despite global volatility, which has been largely driven by US-imposed tariffs. This volatility means it will be 2027 and beyond before we can fully understand the true impact of tariffs on Ireland’s exporting sectors. We expect exports, which grew by around 7.5% in 2025, to rise only marginally in 2026 as a consequence of this 'whiplash' effect. However, exports are projected to resume strong growth at 4% in 2027.

The story within the domestic economy is more prosaic. Consumer spending is holding up, but inflation will dent its trajectory. While the labour market is showing signs of softening, investment remains strong. Most of the levers to support long-term economic development- such as infrastructure delivery, skills development, regulation, and supporting innovation and digitalisation- remain firmly within our control."

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