Ireland is set to post remarkably strong GDP growth of 10.6% in 2025, driven by an exceptional first half of the year.
Growth momentum is expected to slow in 2026, with a more modest increase of 0.2%. However, combined growth over 2025–2026 will average more than 5% per annum, placing Ireland’s domestic economy among the highest performing economies in the EU.
Ireland’s domestic growth remains robust, supported by exports and strong demand. Key drivers include SME performance, AI adoption, migration, and tourism.
Employment hit an all-time high in 2025 at more than 2.8 million, but unemployment was 5.0% in October, reflecting workforce growth.
Wages growth remains strong at 5%, but inflation is eroding gains. Headline inflation reached 2.9% in October, and grocery and housing costs are climbing 6–7%, reducing disposable income and negatively impacting consumer confidence.
Government boosts capital spending to offset sharp decline in private investment.
Ireland has outpaced most EU countries in population and economic growth since 2019, with the population up 7% and the economy expanding by over 50%. Yet, public and private investment has fallen by nearly 60% in absolute terms.
To address this, the Government has increased National Development Plan funding to €103 billion for 2026–2030, with €19 billion earmarked for capital projects in 2026—€2 billion more than in 2025.
Stockpiling and trade clarity helped Ireland weather global risks.
Early 2025 saw US businesses stockpiling Irish goods ahead of potential tariffs, boosting exports and helping the economy navigate uncertainty. The EU-US Trade Deal signed in August provided clarity for Ireland-based businesses.
Only about 3% of Irish exports were affected by US tariffs, as most trade is concentrated in pharmaceuticals and ICT, which remain untaxed.
Low confidence and tariff impacts weigh on outlook despite easing inflation.
With inflation near its long-term target, Europe’s central banks are expected to make one final rate cut before ending the current cycle. Strong labour markets and lower interest rates may not be enough to boost household spending, with savings likely to remain high. Government spending could provide short-term support, although high government debt will require fiscal discipline. Tariffs introduced earlier this year may reduce EU GDP by around 1% by end-2026, while trade patterns continue to shift following the US-EU deal.
More than a year on from the publication of the Draghi report, the pace of reforms on the competitiveness agenda remains slow. Meanwhile, latest data shows that Europe continues to lag other global competitors on innovation, while productivity growth continues to slow.
| European Countries | 2024 | 2025 | 2026 |
|---|---|---|---|
| Ireland (GDP) | 2.6 | 10.6 | 0.2 |
| Poland | 2.9 | 3.4 | 3.3 |
| Ireland (MDD*) | 1.8 | 3.3 | 2.3 |
| Spain | 3.2 | 2.7 | 2.0 |
| Denmark | 3.7 | 2.4 | 1.7 |
| Norway | 0.6 | 2.0 | 1.6 |
| Portugal | 1.9 | 1.9 | 2.1 |
| Netherlands | 1.0 | 1.4 | 0.7 |
| Sweden | 0.9 | 1.3 | 2.1 |
| UK | 1.1 | 1.3 | 1.2 |
| Switzerland | 1.3 | 1.2 | 1.4 |
| Belgium | 1.0 | 1.1 | 1.2 |
| Luxembourg | 0.4 | 1.1 | 1.7 |
| France | 1.1 | 0.6 | 0.6 |
| Italy | 0.5 | 0.6 | 0.6 |
| Germany | -0.2 | 0.2 | 1.1 |
| Austria | -1.3 | 0.1 | 1.0 |
Source: KPMG Global projections of GDP using Oxford Economics’ Global Economic Model. Average % change on previous calendar year measured in real terms. Norway figures represent mainland GDP. *Ireland MDD figures are the Department of Finance’s Budget 2025 forecast.
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