Ireland’s economic growth set to cool, warns bosses’ lobby group

The predicted cooling is unsurprising given international trade turbulence and the boom seen in recent years, said the Irish Business and Employers Confederation (IBEC).

The Irish economy is at an inflection point with growth set to cool in the coming years, Ireland’s main business advocacy group said on Wednesday.

Domestic demand will grow by 3% this year and by 2.7% in 2026, according to Ibec’s predictions.

Employment growth, meanwhile, will slow to 2.4% this year and to 2% in 2026.

GDP will rise to 1.7% in 2025 and 2.1% in 2026. Gross domestic product must nonetheless be considered with caution in Ireland due to the distortive effects of multinational profits.

Growth is slowing due to a number of factors, said Ibec, one of them being the uncertainty facing international trading partners.

“Amongst our major trading partners, Europe is struggling to readjust its business model to new realities in trade and energy costs”, said Ibec CEO Danny McCoy.

“We expect European growth will again struggle to breach the 1% mark in 2025.”

Risks from Trump’s trade policy

McCoy added that the new US administration also presents challenges for Ireland, as it remains to be seen how they will “prioritise between competing domestic and trade policy goals”.

On the campaign trail, Trump proposed tariffs of 10-20% on all foreign imported goods, raising this levy to 60% for China.

The new president believes that tariffs can be used to favour US goods and therefore grow the economy, despite experts’ fears that extra levies will cause a domestic inflationary spike.

Also posing an inflationary risk are Trump’s proposed tax cuts.

While this approach could boost consumer demand, it could also push up inflation, interest rates, and national debt.

If high interest rates push up the value of the dollar, this means imported goods will be more costly for eurozone buyers.

On the other hand, as the gap between the dollar and the euro could widen, this would make Irish goods cheaper for US consumers and potentially increase demand.

Many of Ireland’s exports to the US are also invoiced in dollars, meaning that Ireland could earn more euros for the same amount of dollar sales.

Domestic challenges to growth

Despite global pressures, Ibec argued that Ireland’s key growth barriers are domestic.

The country currently faces bottlenecks when it comes to housing, electricity, water and transport infrastructure, which are all crucial for businesses to grow.

“The main barrier for Ireland is our capacity to deliver projects effectively”, said CEO McCoy.

“Rising capital costs, if coupled with uncertainty and delays, will stifle business investment.”

Wednesday’s report also criticised Ireland’s 2025 budget package, announced late last year.

Ibec branded the budgetary measures as “untargeted”, arguing that money was given to households not in need.

It would be wiser for the government to funnel this money into long-term infrastructure projects, the group added.

Ibec nonetheless stressed that Ireland has the potential to remain competitive if hurdles are addressed, partially thanks to its skilled workforce and stable political environment.