Budget 2026 spending package 'too large', Central Bank warns

James Cox

The Government is being told its spending plans for Budget 2026 are not necessary.

The Central Bank said the €9.4 billion package is "too large" and may have a negative impact on the public finances down the line.

The bank said the Government must cut back on its infrastructure budget or raise taxes to sustain its current spending.

However it said the Irish economy is still performing well.

The bank's director of economics and statistics Robert Kelly says US tariffs are likely to see a reduction in growth next year.

Mr Kelly said: "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.

"So we do see growth slowing in 2026 and 2027 to just above 2 per cent, and it really does reflect us adjusting to that new external environment."

Minister for Finance Paschal Donohoe has defended the Government's spending plans after the criticism from the Central Bank.

Mr Donohoe said he respects the bank's position, but is confident about his spending plans.

"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. We will be making further changes with regard to carbon taxation, the rate of PRSI within our economy will be going up to help fund our auto-enrolment system for better pensions in the future.

"The tax package that we are bringing forward is created by the kind of income growth that we have seen taking place in our economy."