Irish economy to grow by more than 4% through 2027 despite heightened geopolitical tensions
Davy said Ireland’s "very strict" regime for rent restrictions had contributed to a collapse in new private rental construction. Picture: Larry Cummins.
Continued strong employment and favourable fundamentals will underpin growth in Ireland for the next two years, with the economy forecasted to grow by more than 4% through 2027.
In its latest economic forecast update, Davy said that despite high spending, Ireland's fiscal position remains strong, with Government debt projected to fall below 60% of gross national income (GNI) by 2026 and corporation tax receipts expected to exceed €30bn annually.
The stockbroker said employment growth has consistently outpaced forecasts, supported by strong labour demand, inward migration and rising participation rates, particularly among women and older workers.
However, the company's forecasts for new housing completions in 2025 have been lowered to 37,500 units, down from an initial projection of 42,000 units, though output is expected to rise to 50,000 by 2027 with policy support and faster delivery of water and grid infrastructure, Davy said.
Speaking on its downward revision, the stockbroker said: "It has become increasingly clear that a slower pace is more likely.
"Issues relating to water/grid connections, planning delays, high construction costs and broader viability concerns remain significant challenges that must be addressed to achieve a much-needed increase in output from the 2024 level of 30,000 homes."
It said Ireland’s "very strict" regime for rent restrictions had contributed to a collapse in new private rental construction. However, it said the ability to charge market rates upon a change in tenancy should improve the investment case for such supply.
Davy noted the economy faces numerous challenges to maintain competitiveness, especially in terms of housing and infrastructure, noting that failure to deliver on the large shortfalls that exist would worsen Ireland’s economic outlook considerably.
Meanwhile, inflation is forecasted to remain below 2%, while consumer spending remains resilient, supported by wage and employment growth.
Despite steady growth forecasts, Davy warned of heightened geopolitical concerns, with rising global protectionism and trade tensions posing risks to the economy due to its heavy reliance on foreign direct investment.
Although Ireland is expected to remain attractive to FDI in the near term, Davy said this risk highlights the need for domestic investment in housing and infrastructure.
"Geo-economic fragmentation risks may become more evident in the 2030s and 2040s, highlighting the need for an increased domestic base of industrial and services firms should be nurtured alongside ambitious targets to capitalise on European-level efforts to fill gaps in the single market, namely a functional capital markets union capable of channelling European savings and investments into high-productivity European firms," the stockbroker said.
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