David McNamara: Irish GDP reveals more about the global economy than Ireland
Crucially, the domestic economy remains solid.
The latest set of national accounts data for Ireland, released by the Central Statistics Office (CSO) last week, provides further evidence of the volatility of GDP growth on paper, masking more benign trends in the real economy.
As ever, a small number of very large multinationals continue to drive the headline trends.
GDP growth collapsed in Q1, down 12.1% in the quarter and by 17% on an annual basis. This was driven by the unwinding in goods export growth (-27.5% y/y), following the tariff and pharma-related surge in the first half of 2025.
Specifically, it appears the export sales of Eli Lilly, related to its blockbuster weight-loss drug ingredient manufactured in its Cork facility, have contributed to the exceptional peak and trough in Irish exports and GDP over the past year.
This was also demonstrated in the 28.5% annual fall in multinational sector output. However, beneath the noisy data, domestic indicators point to a moderate growth picture so far in 2026.
Domestic sector output rose 1.4% y/y in Q1. Modified Domestic Demand (MDD), which strips out some of the volatility of the multinational sector, rose by 0.6% q/q. On an annual basis, MDD is up by 4.3% compared to Q1 2025.
Within this, consumer spending was also up 0.6% q/q and 2.6% y/y, pointing to solid underlying domestic demand in the economy in Q1, despite rising geopolitical risks.
Modified investment rose 9.4% y/y, reflecting strong annual gains in building and construction machinery and equipment, as well as intangibles.
The CSO has previously noted that much of this surge in investment relates to the fit-out of data centres and related software, suggesting some structural uplift in capex in the FDI sector, perhaps related to the AI investment cycle.
Other reliable domestic indicators point to continued growth in the Irish economy.
Average weekly earnings rose by 4% y/y in Q1. This is in line with the 2% growth in annual payroll employment, albeit last week’s Labour Force Survey pointed to flat annual jobs growth in the opening three months of the year.
Exchequer returns data also continue to point to a robust fiscal position. In May, tax receipts totalled €10.7bn, up 11% on May 2025. Year-to-date, revenues were up 7.0% versus the same period in 2026.
Within this, corporation tax receipts were up 9%, while both income taxes and VAT are growing in excess of 7%. However, spending growth is once again overshooting budget projections, by 7.2% y/y in May.
Overall, as has been the case for a number of years, the continued surge in tax revenues is more than compensating for this, and crucially, the domestic economy remains solid.
