In 2025, the Irish economy was characterised by exceptional GDP growth driven by multinational exports, contrasted with more moderate domestic growth and persistent structural challenges like housing and infrastructure.
Macroeconomic Performance
GDP Growth: Forecasts for 2025 GDP growth ranged from 10.2% to 12.8%. This surge was largely attributed to exceptional pharmaceutical exports, particularly to the US, as firms "frontloaded" shipments in early 2025 to anticipate potential new tariffs.
Modified Domestic Demand (MDD): A more accurate measure of the internal economy, MDD was projected to grow by approximately 3.4% to 3.9%. This reflected resilient consumer spending and public capital investment, though it trailed the inflated GDP figures.
Inflation: Headline inflation (HICP) remained relatively stable, averaging around 1.9% to 2.1% for the year. While energy prices declined, services inflation (notably in education, restaurants, and hotels) remained a primary upward pressure.
Labour Market: Ireland maintained near-full employment, with the total number of people in work reaching a record high of over 2.8 million. However, the unemployment rate edged upward from historical lows to approximately 4.9% to 5.0% by late 2025.
Key Economic Drivers
Export Surge: The pharmaceutical and med-tech sectors saw massive growth, notably in ingredients for weight-loss drugs. Goods exports rose by roughly 46% in the first quarter alone.
Public Finances: Ireland recorded a general government surplus of approximately 1.5% of GDP, buoyed by corporate tax receipts. The state significantly increased capital spending on the National Development Plan to address infrastructure gaps.
FDI Resilience: Despite global geopolitical uncertainty, Ireland hosted over 1,800 multinational firms employing more than 300,000 people.
Challenges and Risks
Infrastructure Deficit: Severe bottlenecks in housing, water, and energy remained "the Achilles' heel" of Irish competitiveness. Housing completions for 2025 were forecast at roughly 32,500 units, still well below the estimated annual demand of 50,000+.
Concentration Risk: The economy and tax base remained heavily reliant on a small number of multinational companies, making it vulnerable to shifts in US trade policy and global tax rules.
Consumer Sentiment: Despite rising real wages, consumer confidence waned toward the end of the year due to high living costs and the erosion of disposable income by high rents and grocery prices.
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