Irish GDP to grow by 1.7% in 2025 as economy moderates after years of expansion 

Business group Ibec said a slowdown was not unexpected given the turbulence facing some of Ireland's key trade partners 

The business group noted that ongoing levels of high employment were a welcome indication of strong business activity and economic performance, however, the tight labour market continued to present a challenge in recruitment and retention for employers who are looking to expand. Picture: David Creedon

Irish gross domestic product (GDP) is forecasted to grow by 1.7% in 2025 as the economy undergoes a period of moderation after five years of significant expansion.

Publishing its Economic Outlook Report on Wednesday, business group Ibec said a slowdown was not unexpected given the turbulence facing some of Ireland's largest trading partners, with Europe "struggling to readjust its business model," to respond to modern challenges.  

Ahead of the 34th Dáil on Wednesday, Ibec has warned that Ireland's capacity to grow by delivering critical infrastructure such as water, housing, energy and transport will be the main barrier to continued economic success in the future.

Despite these risks, the business group is forecasting GDP growth of 2.1% in 2026, which will be helped by a rebound in exports, continued increases in consumer spending and growth in investment.

The business group noted that ongoing levels of high employment were a welcome indication of strong business activity and economic performance, however, the tight labour market continued to present a challenge in recruitment and retention for employers who are looking to expand. 

There are, however, clear signs of slowing hiring and turnover in the economy, Ibec added. 

Looking beyond Ireland, Ibec noted: "Europe is struggling to readjust its business model to new realities in trade and energy costs."

"Meanwhile, it remains to be seen how the new US administration will prioritise between competing domestic and trade policy goals."

Looking forward, Ibec forecasts exports to increase by 4.1% in exports, while consumer spending is expected to grow by 3.1%. 

Despite recent evidence of labour tightening, the business group also foresees employment rising by 2.4% in 2025.

"We have the financial resources and skills necessary to unlock our economic potential for the first time in the State’s history," the report noted.

"We also, however, have binding capacity barriers ahead in areas such as housing, electricity grid, water and transport infrastructure which are increasingly weighing on growth."

Speaking on the report, CEO of Ibec, Danny McCoy said: "Ireland has experienced a period of rapid growth."

"Employment by the end of 2025 will be almost 500,000 higher than it was in 2019. Growth is showing signs of moderating domestically. This is to be expected given the pace of recent years and a challenging global outlook.

Looking abroad, Mr McCoy noted that European growth will again struggle to breach the 1% mark in 2025, yet, despite global pressures, Ireland's primary growth barriers are domestic. 

"The EU’s Draghi Report highlights high energy costs, project delays, regulatory burdens, and an incomplete Single Market as challenges for Europe—issues that are equally pressing for Ireland's new government," the CEO said. 

"The main barrier for Ireland is our capacity to deliver projects effectively. Rising capital costs, if coupled with uncertainty and delays, will stifle business investment."

"Nonetheless, Ireland has clear potential to remain competitive in the coming years, with a skilled and growing workforce, a reputation for openness, a stable political environment, abundant energy potential and a commitment to improving national infrastructure."