Ireland’s GDP is forecast to grow by 3.4% in 2025 and 2.5% in 2026 supported by a strong labour market. However, the high uncertainty and deterioration in global trading conditions are expected to detract from growth. Moreover, Ireland’s deep economic ties to the US pose notable downward risks in the context of rising protectionism. The general government balance is forecast to remain in surplus, though significant risks arise from the uncertain outlook for corporate tax revenues.
| Indicators | 2024 | 2025 | 2026 |
|---|---|---|---|
| GDP growth (%, yoy) | 1,2 | 3,4 | 2,5 |
| Inflation (%, yoy) | 1,3 | 1,6 | 1,4 |
| Unemployment (%) | 4,3 | 4,3 | 4,4 |
| General government balance (% of GDP) | 4,3 | 0,7 | 0,1 |
| Gross public debt (% of GDP) | 40,9 | 38,6 | 38,2 |
| Current account balance (% of GDP) | 17,0 | 12,6 | 11,6 |
Continued growth amid elevated external risks
The Irish economy entered 2025 in a strong position. Real GDP rose by 1.2% in 2024, driven by a rebound in exports, while modified domestic demand – which better reflects domestic economic activity in Ireland – grew by 2.7% in 2024, supported by a robust labour market and easing inflation. Preliminary GDP estimates indicate robust growth of 3.2% q-o-q in the first quarter of 2025, likely fuelled by multinationals accelerating exports ahead of potential tariffs.
Steady employment and real wage growth are set to underpin private consumption over the forecast period. However, elevated uncertainty is expected to keep household saving rates above pre-pandemic norms, tempering the pace of consumption growth.
Investment declined sharply in 2024, largely due to intellectual property exports, while modified investment - which excludes the volatile intangible and aircraft leasing components – recorded modest growth. Looking ahead, modified investment is expected to remain subdued due to high uncertainty. Headline investment figures incorporate a technical assumption that intellectual property investment will return to levels similar to those of the past years.
Exports rebounded strongly in 2024, largely driven by multinationals, with pharmaceutical trade surging and computer services remaining robust. While export growth is expected to continue, momentum is expected to moderate amid the imposition of tariffs and a weak external environment.
Overall, GDP is expected to grow by 3.4% in 2025 and 2.5% in 2026. Modified domestic demand is set to expand by 2.2% in 2025 and 2.3% in 2026. However, Ireland’s openness and high trade and investment links to the US leaves it vulnerable to further protectionist policies. While the current US tariff exemptions - notably on pharmaceuticals - cover a large majority of Ireland’s goods exports to the US, the introduction of new tariffs, along with broader US policy changes to disincentivise investment and activity in Ireland present significant downside risks to Ireland’s economy.
Labour market remains strong but shows signs of moderation
Employment continued to grow in 2024, supported by a growing labour supply largely driven by high inward migration and increased participation. However, falling vacancy rates suggest a gradual easing of labour demand pressures. Despite this, the unemployment rate remained close to historical lows at 4.0% in the first quarter of 2025 and is expected to stay low over the forecast horizon, due to the still tight labour market. Employment is set to continue expanding into 2025 and 2026, albeit at a more moderate pace, reflecting the expected expansion in the domestic economy. That said, the Irish labour market remains sensitive to a potential slowdown in exports.
Inflation expected to remain low
HICP inflation remained low in early 2025, averaging 1.6% in the first quarter. However, an uptick in food prices, along with a slower decline in energy prices and still elevated services inflation kept rates slightly higher than previous quarters. Looking ahead, lower prices for non-energy industrial goods and decreases in commodity prices are expected to dampen inflation, and headline inflation is forecast to reach 1.6% in 2025 and 1.4% in 2026.
General government balance to remain in surplus
Ireland’s general government balance registered a surplus of 4.3% of GDP in 2024. A large share (2.6 pps.) of it was driven by a one-off revenue due to the EU Court of Justice’s ruling of 10 September 2024 concerning the taxation of two Apple group companies. Excluding this one-off transfer, the surplus amounted to 1.7% of GDP, as buoyant current revenue growth outpaced increases in public sector pay, investment and social transfers.
In 2025, the surplus is forecast to recede to 0.7% of GDP. Revenue growth is projected to slow down amid heightened levels of consumer and business uncertainty, with the corporate income tax revenue expected to experience a slight decline from its peak levels in recent years. Expenditure growth is set to remain high in 2025 due to strong increases in public sector pay, investment and social transfers. In 2026, as revenue growth is projected to continue at a modest rate while strong expenditure growth is expected to continue, the budget surplus is set to recede to 0.1% of GDP.
The general government debt-to-GDP ratio is forecast to decrease from 40.9% in 2024 to 38.6% in 2025 and to 38.2% in 2026. The debt ratio is set to fall more slowly than if the budget surpluses were translated mechanically into debt reduction, mainly due to transfers to the Future Ireland Fund and the Infrastructure, Climate and Nature Fund, as well as cash-accrual adjustments.
A weaker performance or a downsizing of the multinational-dominated sectors would significantly affect tax revenues, which is a key risk to the fiscal outlook. The outlook for corporate income tax revenues is particularly uncertain, given their concentration among a relatively small number of large multinational companies and a large portion estimated to be windfall, i.e. beyond what is explained by underlying domestic economic activity.