Irish economy grew strongly in 2025 by almost 5%

Published: 06 March 2026
The English Chronicle Desk
The English Chronicle Online

Ireland’s domestic economy expanded by almost five per cent last year, official figures have confirmed, defying persistent fears over US trade tariffs and geopolitical instability .

Modified Domestic Demand (MDD), the preferred measure for stripping out the distorting effects of multinational activity, grew by 4.9 per cent in 2025, according to the Central Statistics Office . Consumer spending rose by a solid three per cent, reflecting rising real incomes and a record-breaking labour market that saw 2.83 million people in employment by the end of the year .

The broader Gross Domestic Product (GDP) figure, while considered unreliable for measuring the underlying Irish economy due to the outsized influence of multinational corporations, surged by more than 12 per cent . This was driven largely by pharmaceutical exports to the United States, particularly weight-loss drugs, and front-loading of activity ahead of threatened tariff hikes .

Tánaiste and Minister for Finance Simon Harris welcomed the figures, stating they confirm that “despite external headwinds, the domestic economy grew strongly last year” . He noted that building and construction investment recorded robust growth of nine per cent, reflecting solid momentum in the residential sector .

However, Harris cautioned against complacency, warning that the conflict in the Middle East presents a “potentially significant headwind to global growth” and a risk to the inflation outlook .

Fears that the Irish economy would be seriously hit by US President Donald Trump’s tariffs have so far largely failed to materialise . This is because tariffs have generally not been applied to pharmaceutical products, which remain Ireland’s main export to the US . The Central Bank of Ireland noted in September that the effective tariff rates now in place are less severe than initially feared and unlikely to prompt a material loss of existing foreign investment .

Goods exports from Ireland surged in the early months of 2025 as companies ramped up activity in advance of possible US tariffs on European Union imports . The globalised industry sector expanded by over 29 per cent, while the information and communication sector posted an increase of 11.5 per cent .

Despite the strong headline figures, economists warn that many voters, particularly those under 35, do not feel prosperous due to high housing costs . The jobs market remains healthy, but young workers see rents devouring large chunks of their incomes .

The European Commission’s 2025 Country Report for Ireland noted that the lack of affordable housing affects both competitiveness and social stability . Price-to-income levels are currently the highest in the EU, limiting firms’ ability to attract skilled workers and putting pressure on wages. The share of employed adults aged 18 to 34 living with their parents has doubled in ten years to 42 per cent .

Thomas Pugh, an economist at consulting firm RSM, warned that Ireland’s reliance on energy imports makes it vulnerable to rising wholesale prices. “Ireland imports almost 80 per cent of its energy from abroad, making it particularly exposed,” he said, adding that sustained increases in European gas prices could push inflation back over three per cent .

The Irish economy has been underpinned by a continuing corporation tax windfall, with receipts more than doubling since 2019 and representing 27 per cent of total tax revenue in 2024 . Half of these receipts are estimated to be “windfall” in nature, linked to the concentration of multinational activity .

A national wealth fund has been set up to invest some of this money, but it is also allowing day-to-day government spending to increase, which adds to economic growth . The government is planning major infrastructure projects in the coming years, including Dublin’s first underground railway line .

Dermot O’Leary, chief economist with Goodbody, described the performance as “yet another year of outperformance for the Irish economy, possibly only exceeded by Malta” . He noted that on a longer-term horizon, MDD was 25 per cent higher in Ireland than in 2019, compared to just six per cent in the euro area overall .

The European Commission projects that Ireland’s GDP growth will moderate in coming years, with forecasts of 0.2 per cent in 2026 before stabilising at 2.9 per cent in 2027 . The Central Bank of Ireland has revised its 2025 MDD forecast upwards to 2.9 per cent, boosted by government spending and strong investment and consumer activity .

However, significant risks remain. The concentration of economic activity in a few multinational-dominated sectors leaves Ireland’s economy sensitive to sector-specific disruptions or firm-level shocks . The possible relocation of highly mobile intellectual property assets held in Ireland poses a risk to value added, exports and tax revenue .

Bank of Ireland economists noted that while GDP contracted by 3.8 per cent in the final quarter of 2025, this reflected the unwinding of the September export surge around the time of tariff threats. Manufacturing output has remained more stable, indicating “a structural upward shift in the level of GDP associated with new pharmaceutical production facilities and weight-loss drugs” .

The OECD has urged prioritising “productivity-enhancing reforms, spending efficiency, and stricter domestic fiscal controls” while ensuring planned infrastructure investment is properly sequenced to avoid adding to inflation .

Harris reiterated the government’s commitment to monitoring international developments closely, with updated economic forecasts due in the coming weeks as part of the Annual Progress Report .

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