‘Fog lifting’ on economic risks as pharma sector weathers global policy uncertainty — report

Goodbody economists say Ireland’s economy is stabilising despite tariffs and policy risks, but warn housing and competitiveness challenges persist

Sunrise at Tivoli at the Port of Cork. A threat to global investment in the pharmaceutical industry in Ireland remains but “the fog is lifting” on the major policy issues that threatened Ireland’s economic model, according to Goodbody’s chief economist. Picture: Larry Cummins

A threat to global investment in Ireland’s pharmaceutical industry remains, but “the fog is lifting” on the major policy issues that have threatened Ireland’s economic model, according to Goodbody Chief Economist Dermot O’Leary.

Mr O’Leary made the comments in Goodbody’s Irish Economic Health Check, published on Wednesday. The report states that after a period of “exceptional policy uncertainty” in the first half of 2025—driven by new tariffs and potential US corporate tax changes—a clearer outlook is emerging.

Goodbody acknowledged that the 15% tariff on EU goods entering the US is a significant barrier but far less severe than the punitive rates once threatened. The report notes that the pharmaceutical and medical devices sector is particularly important to Ireland, accounting for 65% of total goods exports and 90% of exports to the US. It adds that this success brings both opportunity and vulnerability.

“Risks prevail in relation to pharmaceuticals, but a 15% tariff cap and some recent deals provide some clarity and guidance,” said Mr O’Leary. “More protectionist economic policies are a challenge for the Irish economy, but the risks around corporation tax receipts have reduced given the modest tax policy changes that the US Congress has voted through.

“While protectionist measures remain, the worst tariff fears have not materialised. Similarly, corporate tax proposals that could have undermined Ireland’s competitiveness have largely been shelved.” 

Goodbody’s report notes that job announcements in Ireland by IDA-supported companies fell by 16% year-on-year in 2025

“We cannot tell from the data whether this weakness is due to the firms’ unwillingness to make these investments public or whether it is reflective of a broader slowing of FDI into Ireland,” said the report. “Indeed, IDA Ireland noted in its first half update that there were 179 separate investments, up by 37% year on year.” 

The production of ingredients for GLP-1 weight-loss drugs has also boosted pharma exports, accounting for the vast majority of the increase in US exports so far this year, according to Goodbody.

Goodbody expects corporation tax receipts to rise further in 2026 to €34 billion, representing a record 31% of total tax revenues, partly due to the higher 15% corporate tax rate for large companies.

The firm has upgraded its forecast for modified domestic demand — which excludes foreign direct investment — from 3% to 3.6% growth in 2025, with 3.2% growth expected in 2026.

However, the report warns that underlying deficits persist once excess corporation tax receipts are excluded, and that public spending continues to exceed sustainable levels.

“Discipline on current spending is essential to avoid damaging inflationary pressures.” 

The report also warns that Ireland must address medium-term threats to competitiveness by focusing on “the efficient delivery of housing, energy and transport infrastructure.”

It adds: “Financial resources are not the constraint – capital spending is set to reach €19.1bn in 2026, an increase of 12% on 2025. The challenge lies in execution - removing planning bottlenecks, coordinating utilities, and accelerating delivery.” 

Mr O’Leary said housing remains Ireland’s most pressing domestic challenge.

“After a policy-drive surge in commencements in 2024, housing starts have fallen sharply this year. Apartments, critical for meeting urban density requirements, face viability hurdles that require targeted interventions. Government measures ranging from rent control reform to VAT reductions aim to bridge the gap, but private investment must play a larger role. Without it, the goal of delivering 50,000–60,000 units annually will remain elusive.” 

The Goodbody Irish Economic Health Check was prepared by Mr O’Leary and economist Max Mulcahy.