Ireland’s economy is like a dog simultaneously barking and wagging its tail. The question is which end to believe.
While the European Commission is forecasting the economy here will record “exceptional” growth of close to 11 per cent this year, the Central Bank is warning about the country’s unique exposure to a slowdown in global trade on the back of US tariffs.
In its latest financial stability review, the regulator also warns about the possible spillover effects on Ireland if the US AI bubble bursts.
Economic forecasts here, no matter how positive, always come with caveats, potential banana skins. Being a small, open economy has its occupational hazards.
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This time the leprechaun in the national accounts is exports.
They surged between January and May this year as pharmaceutival multinationals front-loaded exports into the US ahead of Donald Trump’s tariff announcement in April.
[ Irish economy forecast to grow at eight times euro area averageOpens in new window ]
Most of it related to exports by pharma giant Eli Lilly. The company produces the ingredients for its two blockbuster weight-loss drugs Mounjaro and Zepbound in Ireland.
Either way, this has created a bulge in our headline gross domestic product (GDP) metrics. The commission expects Irish GDP to expand by 10.7 per cent this year, eight times the growth it is forecasting for the euro zone as a whole.
Irish business grandee Gary McGann on working with Michael Smurfit, the fall of Anglo Irish and the current state of the Irish economy
But GDP has become progressively detached from the real economy here because of the tax planning activities of multinationals which use intellectual property assets to declare as much profit as they can in the State.
According to the Central Statistics Office (CSO), Ireland’s headline GDP was €562.8 billion last year, nearly 43 per cent bigger than the agency’s measure of modified measure of gross national income (GNI*) which was €321.1 billion.
In other words, GDP overstates the size of the Irish economy by about 40 per cent. That 40 per cent disparity is why the real feel in the Irish economy differs so strikingly from the headline growth metrics that surround it.
Throw in an aggravated housing crisis and a dysfunctional health service and Ireland’s turbo-charged economic performance can seem illusory.
The Economist magazine left Ireland out of its recent country “rich list” – a league table of how GDP levels in different countries compare - because it claimed Ireland’s data was “polluted by tax arbitrage”.
In its report, the European Commission notes that as the front-loading effect unwinds, growth here is expected to moderate to just 0.2 per cent in 2026, “reflecting a technical base effect from 2025 dynamics, before stabilising at 2.9 per cent in 2027″.
That means we’ll swing from growing at eight times the rate of the euro zone to growing at a fraction of the euro zone rate, all which means precious little to the average worker here with our GDP numbers now mere statistical noise.
