Irish economy sustains momentum despite turbulent year

• Ibec Publishes Latest Economic Outlook, forecasting domestic demand growth of 2.8% in 2026.
• Inflation will slow as 2026 progresses as contribution of global food commodities to price growth fades

Ibec, the group representing Irish business, today published its latest Economic Outlook, which forecasts domestic demand growth of 2.8% in 2026, following a 3.4% growth rate in 2025. The Outlook notes that the Irish economy continues to show sustained momentum through the end of 2025, driven by positive momentum in the global economy, and that 78% of Irish exports to the US have, so far, remained exempt from tariffs.

Meanwhile, GDP grew from 2.6% in 2024 to 11.6% in 2025, largely due to the front-loading of pharmaceutical goods in the early part of the year to avoid potential US tariffs. Whilst this moderated somewhat throughout the summer, a further spike in September - ahead of expected Section 232 tariffs at the time - left total Irish goods exports up 28% (€46 billion) on the first nine months of 2024, with a 66% increase in BioPharma exports in the first eight months of 2025 driving the numbers.

The Outlook also highlights consistent signs of a slowdown in the labour market, though it is starting from a historically high base. Despite this cooling, strong population growth, coupled with wage growth and moderate inflation, continues to point towards ongoing growth in both household incomes and consumer spending in 2026.

Gerard Brady, Chief Economist and Head of National Policy, said:

"We are now seeing that Technology - especially AI and Geopolitics are driving economics in a material way, which leads to greater uncertainty and makes business planning more difficult.

Since President Trump’s April tariff announcement, most of 2025 has been defined by a volatile trading environment. Despite this, over the last number of months we have seen renewed momentum in investment decisions, particularly with a US-EU trade deal in place. While elements like Section 232 remain to be fully resolved, especially for Ireland, the economy, while likely to slow next year, remains extremely resilient.

In terms of the global economy, the full impact of tariffs on inflation and the trade is still expected to hit next year, as the pass-through takes time to materialise through supply chains . On the other hand, the full impact of US tax cuts, associated with the 'Big Beautiful Act' and the global interest rate cuts enacted throughout the current year won't fully impact the real economy until 2026 and into 2027.

A major story which is helping to drive global growth in 2025 and will develop further in 2026 is the AI investment boom, which is driving both equities and growth in the US economy. Equity markets have been buoyant, with stock prices outpacing strong earnings, raising questions about an AI 'bubble.' The ratio of equity prices to earnings is near its highest level since the dot-com boom, demonstrating this market exuberance. The level of capital investment and high valuations must eventually be matched by technological adoption and company earnings. This boom in investment could lead to huge upside potential for global productivity, or the market will have to adjust or correct itself if AI takes longer to meet expectations. Bubble or not, the current rate of investment in AI infrastructure like fabs, data capacity and energy will ultimately benefit the global economy and adoption in the long-run.”