Economy to see robust growth this year and in 2026

While Irish economy is in 'good shape', policy shifts in the US are 'making for an unsettled external environment', EY Ireland forecast says

Employment growth is expected to be 2.2% this year and 2% next year, while inflation is expected to average out at 2% this year, with further interest rate cuts expected as a result. Picture: Denis Minihane.

Ireland’s economy is forecasted to see robust growth this year and continue that momentum into next year, but policy shifts in the US makes for an “an unsettled external environment”.

According to the consultancy firm EY’s latest forecast, modified domestic demand (MDD) will grow by 3.3% in 2025 and 3.2% in 2026. MDD is a measure of domestic economic activity that strips out the activity of the large multinationals based in Ireland.

Gross domestic product (GDP) is expected to grow 4% in 2025 and 3.8% in 2026. However, GDP is heavily skewed by the activity of the multinationals.

Overall, Ireland is forecast to outpace the growth forecasts of 1% for the eurozone, 1% for the UK, and 2.2% for the US.

Employment growth is expected to be 2.2% this year and 2% next year, while inflation is expected to average out at 2% this year, with further interest rate cuts expected as a result.

Dr Loretta O’Sullivan, chief economist at EY Ireland: 'While the domestic economy is performing well, globally there is a lot of uncertainty at present, so investment in innovation and infrastructure is needed now more than ever.'

Dr Loretta O’Sullivan, chief economist at EY Ireland, said while the Irish economy had “entered 2025 in good shape”, policy shifts in the US are “making for an unsettled external environment”.

“Wages are rising faster than consumer prices, boosting households’ purchasing power, and the European Central Bank is cutting interest rates, lending support to business investment. More economic growth is in store this year and next as consumers spend on goods and services and businesses invest in technology and other transformation levers,” she said.

“While the domestic economy is performing well, globally there is a lot of uncertainty at present, so investment in innovation and infrastructure is needed now more than ever,” she added.

The Northern Ireland economy is expected to grow by just 1% this year and by 1.7% in 2026. A slowdown in job gains is forecast for the country, with growth of 0.4% pencilled in for 2025.