Economy to grow faster than expected this year – Goodbody
The Irish economy will grow faster than anticipated this year as impact of US tariffs will not be as damaging as feared and the country “dodged a bullet” on US corporation tax changes, according to a new report by Goodbody Stockbrokers.
Due to the strong jobs market and a rising population, the domestic economy will expand by 3.6% in 2025, up from an earlier forecast of 3%.
The report added that growth will remain healthy at 3.2% next year and 2.9% in 2027.
Goodbody’s chief economist Dermot O’Leary said the worst of the tariff fears have not materialised following an agreement to impose 15% tax on EU goods entering the US.
While the tariff was a “significant barrier” to trade it was “far less severe than the punishment once threatened.”
Mr O’Leary said the Trump administration’s failure to get corporation tax changes through the US Congress meant measures which could have undermined Ireland’s competitiveness have been shelved.
The report said new job announcements by IDA-supported companies were down 16% year on year.
“We cannot tell from the data whether this weakness is due to the firms’ unwillingness to make these investments public or whether it is reflective of a broader slowing of Foreign Direct Investment (FDI) into Ireland,” Dermot O’Leary said.
The IDA’s first half update showed 179 investments up 37% in the first six months of the year compared to 2025.
He said the risk to the pharmaceutical industry in Ireland remained but had lessened.
On housing, Mr O’Leary said 33,845 homes will be built this year, rising to 37,272 next year and 39,126 in 2026.
He added that planning permissions had fallen to a five-year low in the second quarter of this year, increasing the risk of the Government undershooting its target of 303,000 homes between 2025 and 2030.
Mr O’Leary said rent reforms, changes to apartments standards and lower VAT on apartment sales should help ensure a “much bigger” contribution from the private sector.
On the public finances, the report notes Government spending will rise by 8.6% this year and 8.2% in 2026, far ahead of the Coalition’s long-abandoned 5% spending rule.
“Consistent with recent years, there has been an ongoing spending creep,” the economist said.
He added this risked “procyclical over-heating with the economy near full employment.”
The report said new job announcements by IDA-supported companies were down 16% year on year.
Mr O’Leary added “we cannot tell from the data whether this weakness is due to the firms’ unwillingness to make these investments public or whether it is reflective of a broader slowing of Foreign Direct Investment (FDI) into Ireland.”
The IDA’s first half update showed 179 investments up 37% in the first six months of the year compared to 2025.
He said the risk to the pharmaceutical industry in Ireland remained but had lessened.
On housing, Mr O’Leary said 33,845 homes will be built this year, rising to 37,272 next year and 39,126 in 2026.
He added that planning permissions had fallen to a five-year low in the second quarter of this year, increasing the risk of the Government undershooting its target of 303,000 homes between 2025 and 2030.
Mr O’Leary said rent reforms, changes to apartments standards and lower VAT on apartment sales should help ensure a “much bigger” contribution from the private sector.
On the public finances, the report notes Government spending will rise by 8.6% this year and 8.2% in 2026, far ahead of the Coalition’s long-abandoned 5% spending rule.
Mr O’Leary said “Consistent with recent years, there has been an ongoing spending creep.”
He added this risked “procyclical over-heating with the economy near full employment.”