Ireland’s economy is estimated to have shrunk by 1.6 per cent in the 12 months to the end of June, the Central Statistics Office (CSO) said on Wednesday. However, the volatile numbers come on the back of a surge in exports last year as pharma firms here rushed to stockpile products in the US before Donald Trump’s tariffs.
Still, Irish gross domestic product (GDP) – the total value of goods and services produced in the economy – increased by 3.9 per cent between the first and second quarter of the year, according to the CSO data, which will be subject to revision.
It meant that on an annual basis, GDP had contracted by an estimated 1.6 per cent compared with the 13 per cent decline observed in the 12 months to the end of March.
“Looking ahead, geopolitics is likely to dominate [GDP data] in the short to medium term,” said Aaron Bright, an investment analyst at IG. “A June ceasefire briefly reopened the Strait of Hormuz and cooled oil prices, but July’s renewed US-Iran clashes have sent Brent oil prices upwards again. That could keep inflation elevated, squeeze households and make the outlook uncertain as we move into 2027.”
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The CSO said the quarterly increase in GDP was driven mainly by an increase in output from the information and communications technology (ICT) sector, which is dominated by multinationals.
Economists consider Irish GDP to be an unreliable metric due to the distorting impact of large intellectual property and aircraft leasing transactions by multinationals operating in the State.
Forecasters expect the Irish domestic economy, as measured by modified domestic demand (MDD), to grow this year.
The Central Bank and the Economic and Social Research Institute (ESRI) recently increased their expectations for growth in MDD – a metric which attempts to strip out aircraft leasing and intellectual property.
In its quarterly economic commentary last month, the ESRI said growth is being driven by investment in ICT equipment, which has ballooned in recent months, as multinational technology companies pump money into data centres and artificial intelligence infrastructure.
The initial GDP estimate is often revised later as the CSO gathers more data on the time period in question.
