A tariff-related boost to pharmaceutical exports lifted GDP growth to 12.4% in 2025. The economy is projected to contract by 1% in 2026, due to the unwinding of a frontloading of exports, geopolitical uncertainty and higher energy prices. GDP will grow by 2.9% in 2027, helped by an export market recovery. Underpinned by a relatively resilient labour market, modified domestic demand, which controls for the main distortions arising from multinational activity, is projected to moderate but grow by 2.1% in 2026 and 2.5% in 2027.

The fiscal stance is broadly neutral in 2026-27. Explicitly time-bound, broad-based reductions in energy excise duties are among the main recent measures against the energy shock. More targeted measures would preserve price signals and incur a lower fiscal cost. Amid windfall corporate tax gains, a binding domestic fiscal rule will be vital to ensure medium-term fiscal sustainability. Faster permitting processes to accelerate the deployment of renewable generation capacity would enhance energy security.

Ireland’s living standards have improved considerably over the past decade. Driven largely by multinational enterprises, per capita income and labour productivity have surged to among the highest in the OECD, although domestic firms have remained far less productive. Robust population growth, supported by net migration inflows, plus rising participation rates among women and seniors, have pushed up employment rates. Private domestic investment has been volatile in the multinational sector and subdued overall lately.

Improving access to childcare and reducing tax disincentives for second earners are key to further increasing participation rates and lowering the high share of women on part-time contracts. A more diversified revenue structure would increase resilience to shocks while providing more stable funding for productivity-enhancing long-term investments. Ensuring that physical and digital infrastructure networks meet the quality standards required by an innovation-oriented economy is paramount to preserving Ireland’s attractiveness to foreign investors.