Central Bank Critiques €9.4 Billion Budget 2026 Spending Plan

The Central Bank of Ireland has expressed concerns regarding the Government’s proposed spending plan for Budget 2026, labeling the €9.4 billion package as “too large.” According to the bank, the current spending trajectory could adversely affect public finances in the future. The Central Bank warned that the Government might need to either reduce its infrastructure expenditures or consider tax increases to maintain its fiscal position.

Despite these warnings, the Central Bank acknowledged that the Irish economy continues to perform well. In a statement, the bank’s director of economics and statistics, Robert Kelly, highlighted potential challenges ahead, particularly due to anticipated reductions in growth caused by US tariffs. Kelly noted, “The reality is – although the short-term outlook has improved and we’re holding resilient to the uncertainty – that this is a big trade shock and it will have to work its way through the economy.” He projected that growth would slow in 2026 and 2027 to just above 2 percent, as the economy adjusts to the new external environment.

Minister for Finance Paschal Donohoe responded to the Central Bank’s critique, reaffirming his confidence in the Government’s spending strategies. While acknowledging the bank’s position, Donohoe emphasized the importance of the planned spending. He stated, “As we move into next year, there will be a number of moves that are taking place that will lead to a broader tax base.”

The Minister outlined future changes, including adjustments to carbon taxation and an increase in the rate of PRSI to fund an auto-enrolment system aimed at improving pensions. Donohoe argued that the tax package being introduced is supported by the income growth that the economy has experienced.

The ongoing debate between the Central Bank and the Government highlights the delicate balance between fiscal responsibility and economic growth. As Budget 2026 approaches, the Government will face mounting pressure to reassess its spending priorities while responding to the evolving economic landscape.