THE Bank of Ireland (BoI) has upgraded its economic outlook for the year.
The bank now expects the Irish economy to expand by 3.4% in 2025 and 2.6% in 2026.
Overall GDP, which includes the impact of US companies headquartered in the country, is projected to grow by 10.7% this year, up from a previous forecast of 8.1%.
Chief economist for the bank Conall Mac Coille said the revision reflects Ireland’s continued ability to weather global headwinds, particularly due to its strong pharmaceutical and ICT sectors.
“Ireland’s defensive export profile continues to shield it from volatility,” he said, noting that recent trade agreements between the White House and Pfizer have ensured that most Irish pharmaceutical exports remain exempt from new US tariffs.
While the US administration has introduced a 15% levy on European imports, only about 3% of Irish exports are affected.
Mac Coille described the impact as “minimal”, highlighting that deals with major drugmakers like Pfizer and AstraZeneca have protected Ireland’s export position.
BoI expects exports to grow by 7.5% in 2025 and by 4.5% in 2026, with much of the recent surge linked to new pharmaceutical production facilities coming online rather than short-term stockpiling.
The housing market remains a key pillar of the domestic economy.
BoI forecasts 34,500 new homes will be completed in 2025, matching earlier projections following a 4% rise in residential construction reported by the Central Statistics Office in the third quarter.
Over the past 12 months, approximately 33,000 homes were built, which is the highest annual total since the Celtic Tiger years.
Despite improved supply, house prices are expected to rise by 6% in 2025 and 3.5% in 2026, reflecting persistent demand and limited availability in key urban areas.
“Current figures suggest there are two to three years of apartment supply under construction in the capital,” Mac Coille said, adding that affordability pressures are likely to remain stable as wage growth keeps pace with price increases.
The bank also warned of potential fiscal vulnerabilities.
Ireland’s heavy reliance on corporate tax receipts from a small number of multinationals poses a risk, with any sudden revenue shortfall likely to trigger “swift budgetary adjustments”.
BoI anticipates that consumer spending will increase by 2.8% this year and by 2.4% in 2026, supported by strong wage growth and easing inflation.
Employment is expected to grow modestly next year.
Despite global challenges, Mac Coille said Ireland remains in an “enviable position” compared to other EU economies.
“While trade and fiscal risks remain, the fundamentals of Ireland’s economy are strong,” he said.
“Robust exports, resilient consumer demand, and continued investment in housing all point to steady, sustainable growth.”
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