Ireland’s economic performance and standard of living have made impressive progress. However, to maintain robust growth and high living standards, Ireland should now focus on modernising its infrastructure, ensuring enough affordable housing and advancing reforms and investments to combat climate change, according to a new OECD report.
The latest OECD Economic Survey of Ireland says that the Irish economy has continued to be resilient in the face of major shocks. Strong job creation is driving the domestic economy, with rising female labour market participation and substantial net inward migration.
Economic activity is set to be robust in 2025-26 as inflationary pressures and financial conditions ease and volatility from the multinational sector subsides. Real GDP growth is projected at 3.7% in 2025 and 3.5% in 2026. Headline consumer price inflation is expected to be around 1.8% in 2025-26.
The unemployment rate is set to stabilise around 4.3% in 2025-26. But downside external risks to growth have become more prominent, highlighting the importance of increasing resilience to shocks.
Public finances are currently supported by buoyant tax revenues. Even so, fiscal prudence is required in the face of spending pressures from ageing, climate change and housing investment. However, around half of the cost-of-living measures in the Budget 2025 package are untargeted. Enhancing the fiscal framework, boosting spending efficiency, and diversifying tax revenues would improve long-run fiscal sustainability.
The planned investments in housing, digital and green transformations, infrastructure, and healthcare are critical for future competitiveness, but face capacity constraints. Reducing labour and skills shortages, lowering legal costs and further easing administrative burdens on businesses would boost productivity and help preserve Ireland’s cost competitiveness. The recent increases in female employment are welcome, but more is needed. Making childcare subsidies more means-tested would improve equal access.
“Housing supply has not kept up with rising population growth and housing availability and affordability challenges affect both the well-being of certain segments of society and the economy’s competitiveness,” said OECD Chief Economist Álvaro Pereira, presenting the Survey in Dublin with Irish Minister of Finance, Paschal Donohoe. “A better coordinated and forward-looking approach to housing policies is needed to create investment certainty and increase housing supply.”
Policies to increase housing density, improve land use and planning, and boost productivity and lower costs in the construction sector would help overcome continued imbalances between housing supply and demand. Ensuring adequate supply and funding for social housing would improve living conditions for the most vulnerable and help combat homelessness.
Meeting the ambitious climate targets of reducing greenhouse gas emissions by 51% from 2018 levels by 2030 and achieving climate neutrality by 2050 will require substantial reforms and investment. Speedier implementation of plans and pricing emissions more uniformly across sectors are key. Faster permitting and grid connection processes, as well as upgrades in transmission, distribution, and storage infrastructure, would help boost the share of renewables in electricity generation.
See an Overview of the Economic Survey of Ireland with key findings and charts (this link can be used in media articles).
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