Irish GDP falls 12.1% driven by contraction in pharmaceuticals

'GDP was dragged down by a collapse in goods exports, as last year’s surge in exports ahead of US tariffs continues to unwind', says economist

The contraction in pharmaceuticals reflect a higher than expected increase last year as companies sought to frontload exports to the US ahead of the imposition of tariffs. 

Ireland’s gross domestic product (GDP) fell by more than 12% during the first quarter of this year largely driven by a contraction in the pharmaceutical-heavy industry sector, as the surge in activity recorded last year unwinds, new data from the Central Statistics Office (CSO) shows.

In advance of tariffs being imposed in April last year, numerous pharmaceutical firms frontloaded their exports from Ireland to the US which lead to a surge in the export figures and subsequently led to an increase in Ireland’s GDP towards the end of 2024 and 2025.

However, according to the latest data from the CSO, that growth now appears to be unwinding as the international trade environment becomes more settled.

Between January and March this year, GDP fell by 12.1% compared to the final quarter of 2025, and by 17.1% compared to the first quarter of 2025.

Much of the fall-off in GDP can be attributed to a 35% fall in activity in the industry sector, which is dominated by pharmaceutical companies.

In addition, the information and communications technology sector — which includes multinational tech companies — saw a contraction of 2%. Overall, multinational-dominated sectors contracted by 27.1% during the first quarter of this year while domestic sectors expanded by 0.4%.

Assistant director general at the CSO Chris Sibley said the 12.1% drop in GDP during the first quarter of this year was “very unusual”, but “not surprising” given the increase seen a year ago.

“It has taken a couple of quarters to unwind. It is an unusual number this quarter but in the context of the last 12 months it is not unexpected,” he said.

Chief economist at consulting firm RSM Ireland Thomas Pugh said the fall in GDP “means that growth has been negative for four consecutive quarters now, but don’t believe the headlines, the Irish economy isn’t in a prolonged recession”.

“GDP was dragged down by a collapse in goods exports, as last year’s surge in exports ahead of US tariffs continues to unwind. More importantly, we think the domestic economy will grow by around 2.5%-3% this year,” he said, citing the robust labour market, strong household savings rate, and Government support to insulate households from energy price shocks.

When it comes to other sectors of the economy, the professional, administrative, and support sector grew by 1.5%, while construction increased by 1.2%. Sectors which posted contractions included the financial and insurance activities sector, down 5.6%, as well as arts and entertainment, down 4.4%.

GDP is not the preferred measure for the growth of the Irish economy as it is heavily influenced by the large number of multinationals with operations here.

Modified domestic demand, a preferred metric of the Irish economy that strips out the impact of multinational firms, grew by 0.6% during the quarter. This measure covers personal, Government, and investment spending.

Personal spending on goods and service grew by 0.6%. Employee compensation, which includes wages and other payments, fell by 3.1% in the quarter, compared to the last three months of 2025. This was driven by a 11.5% decrease in the manufacturing sector and a 5% decrease in the industry sector.

During the first quarter, €28.2bn was paid to employees of Irish owned enterprises, while €15.3bn was paid to those employed in foreign-owned enterprises.

Total exports fell by 7% during the quarter — down €14.5bn — while total imports rose by 4.2%, or €6.5bn. As a result, net exports decreased by 39.8% in the quarter.