Ireland's economy 'significantly' outperformed expectations for 2025
Bank of Ireland's latest economic forecasts have been revised upwards for 2025, with GDP now at 8.1 per cent growth from 3.5 per cent previously. Modified domestic demand has been forecast at 2.9 per cent, compared to 2.8 per cent previously, and employment to 2.6 per cent growth (1.8 per cent previously).
However, this forecast assumes that US tariffs on Irish exports remain at 10 per cent, with pharmaceuticals exempt. Any change to this from August 1 or after would lead to a revision downwards for Irish GDP projections.
Bank of Ireland's Chief Economist Conall Mac Coille said the revised projections reflect an "exceptional surge in multinational output and exports early in 2025" as well as strong momentum in consumer and public spending. He added: "Our upwardly revised forecasts also reflect the strong performance of the domestic economy early in 2025.
"Revisions to CSO data show consumer spending growing at a substantially faster pace (3 per cent) than first thought. The 3.3 per cent pace of job creation is also ahead of expectations. The big picture is that the economy has so far weathered the uncertainty posed by President Trump's tariffs and EU-US trade negotiations."
However, Mr Mac Coille said the outlook is "especially uncertain currently" with looming tariffs. He continued: "Our forecasts assume US tariffs on Irish exports remain at 10 per cent, with pharmaceuticals exempt.
"Any escalation would necessitate a downward revision. We are also concerned by growing evidence that bottlenecks and capacity pressures are not being addressed. The decline in housing completions in 2025 has been well flagged but the 5 per cent contraction in non-residential construction in 2024 (a 5th consecutive year of contraction) reflects further delays in the delivery of infrastructure and the NDP."
However, Bank of Ireland has noted that tariff-related uncertainty has had little impact on the housing market. It is forecasting a 5 per cent house price inflation in 2025, the same as its previous prediction. Dublin is the least affordable city for homebuyers in Ireland (Image: Getty)
In the first half of 2025, exports rose by 9.6 per cent, up 23 per cent on the year. The economic outlook report noted that this largely reflected firms front-running expected US tariffs. However, there was also a structural upward shift in exports, reflecting new pharmaceutical production facilities coming online and fresh investments in intellectual property assets.
Job creation has beaten expectations, up 3.3 per cent on the year with an unemployment rate of 4 per cent in June. However, Bank of Ireland predicts "a gradual softening" of job creation to 2.6 per cent for all of 2025 and 1.4 per cent in 2026 due to US tariffs and an "uncertain global environment".
This would raise the unemployment rate slightly to 4.4 per cent next year.
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