Ireland’s GDP is forecast to grow exceptionally by 10.7% in 2025, largely reflecting strong export activity in the first half of the year. As the frontloading effect unwinds, growth is expected to moderate to 0.2% in 2026, reflecting a technical base effect from 2025 dynamics, before stabilising at 2.9% in 2027. Inflation is projected to remain contained, while the labour market is expected to continue expanding. The outlook for public finances is positive but marked by significant risks to corporation tax revenues.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 10.7 | 0.2 | 2.9 |
| Inflation (%, yoy) | 1.9 | 1.9 | 1.7 |
| Unemployment (%) | 4.6 | 4.7 | 4.7 |
| General government balance (% of GDP) | 1.5 | 1.0 | 0.8 |
| Gross public debt (% of GDP) | 33.1 | 32.5 | 31.3 |
| Current account balance (% of GDP) | 9.7 | 7.8 | 7.3 |
High economic growth despite uncertainty, but volatility persists
Real GDP increased by 18.5% in the first half of 2025, driven by pharmaceutical exports to the US, likely reflecting frontloading in anticipation of US tariffs. The domestic economy also performed robustly, supported by strong private consumption and growth in modified investment (which excludes the more volatile intangible and aircraft leasing components).
A strong labour market and rising real wages are expected to underpin private consumption growth. However, subdued consumer sentiment is likely to keep household saving rates high. Modified investment is projected to grow in the coming years, supported by the government’s updated National Development Plan. Nonetheless, elevated uncertainty is set to continue to weigh on investment growth.
Investment increased sharply in the first half of 2025, driven by base effects and a spike in imports of intellectual property assets in 2025-Q1, which reversed in 2025-Q2. The forecast incorporates a technical assumption that intellectual property investment remains broadly unchanged in the second half of 2025 and on an annual basis through 2026 and 2027, though this projection carries considerable uncertainty.
The recent EU-US trade agreement helped ease tariff-related uncertainty. While the impact of the US tariffs will vary across sectors, the overall effect on Ireland’s exports is expected to be limited, as its main goods exports to the US — notably pharmaceuticals — are not currently subject to these measures. Export growth in the near term is projected to be negatively impacted by the unwinding of the frontloading as firms adjust their trade patterns. However, expanded pharmaceutical production lines in Ireland, along with strong services exports, are expected to contribute positively to growth.
Overall, GDP is projected to grow by 10.7% in 2025, 0.2% in 2026 and 2.9% in 2027. Modified domestic demand - which better reflects domestic economic activity in Ireland - is set to expand by 3.4% in 2025 and 3.2% in 2026 and 2.7% in 2027. Ireland’s growth outlook remains vulnerable to risks stemming from further global trade fragmentation and shifting US policies that could impact the activity and profitability of multinationals operating in Ireland.
Labour market remains robust but shows signs of softening
Employment continued to grow in the first half of 2025, supported by an increasing labour supply. However, a moderation in employment growth and easing wage pressures point to a softening in the labour market. The unemployment rate edged up slightly to 4.6% in the first nine months of the year and is expected to stay at a similar level in 2026 and 2027. Employment is set to continue growing, albeit at a more moderate pace.
Inflation expected to remain stable
HICP inflation remained stable, averaging 1.8% in the first three quarters of 2025. This reflected subdued energy prices and a slowdown in services inflation, although food prices rose markedly. Looking ahead, contained services inflation, stabilising food prices, and declining energy commodity prices are expected to keep overall inflation at 1.9% in 2025, 1.9% in 2026 and 1.7% in 2027.
Public finances in surplus but risks remain
Ireland's general government budget is set to register a surplus of 1.5% in 2025, strongly supported by a buoyant growth in corporate tax revenues. The revenue from other tax categories has also proved resilient in the first half of the year, reflecting continued growth in the Irish economic activity despite a slowing global environment. Government expenditure, after in-year upward revisions, is projected to grow by 7.8% y-o-y.
The surplus is expected to decline to 1% GDP in 2026 and further to 0.8% GDP in 2027. Corporation income tax is set for a strong boost of around EUR 3 billion from 2026 onwards, as Ireland's Domestic Top-up Tax applying a minimum effective tax rate of 15% for large corporate groups is foreseen to start generating receipts. Bracket creep will strengthen personal income tax revenue thanks to a continued growth in wages, while a slowdown is expected for VAT receipts as a range of reduced VAT rates are to enter into force in 2026. Expenditure growth is set to outpace the growth in revenues due to strong increases in permanent spending announced in the budget for 2026. This includes public sector pay, social welfare payments and capital investment, the latter supported by the revised National Development Plan envelope.
The general government debt-to-GDP ratio is forecast to decrease from 33.1% in 2025 to 32.5% in 2026 and to 31.3% in 2027. 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.
The vulnerability of Ireland’s public finances to international developments, such as shifting US trade and tax policies or the global tax rules, remains the key risk exacerbated by the significant concentration of revenues in few pharmaceutical and ICT companies.