The economy is currently experiencing a “moderation” in growth, according to Ibec, which is forecasting a slowdown in employment growth in the coming years.
The business lobby group’s latest economic outlook is forecasting gross domestic product growth of 1.7 per cent this year and 2.1 per cent in 2026. It says the moderation is “not unexpected”, particularly given the turbulence faced by some of Ireland’s largest trading partners.
The report suggests the main barrier to continued economic success will be “our own ability to create the capacity to grow by delivering critical infrastructure such as water, housing, energy, transport, effectively”.
Ibec chief executive Danny McCoy said: “Employment by the end of 2025 will be almost 500,000 higher than it was in 2019. Growth is showing signs of moderating domestically. This is to be expected given the pace of recent years and a challenging global outlook.
“We expect domestic demand to grow by 3.4 per cent in 2025 and 3 per cent in 2026, and employment growth to slow from 3.1 per cent last year towards 2 per cent in the coming years.
“Among our major trading partners, Europe is struggling to readjust its business model to new realities in trade and energy costs. We expect European growth will again struggle to breach the 1 per cent mark in 2025.”
To the west, Mr McCoy said it “remains to be seen” how the new US administration would prioritise between competing domestic and trade policy goals.
“The strength of the dollar may help mediate the impact of any trade policies on Ireland,” he said. “While it is critical that Ireland maintains its long-standing reputation for long-term stability on tax and the broader business environment.”
Despite global pressures, Ireland’s primary growth barriers are domestic, Ibec’s report added.
[ This is the optimistic scenario for the Irish economy in 2025Opens in new window ]
A recent EU report highlighted high energy costs, project delays, regulatory burdens and an incomplete single market as challenges for Europe, issues Ibec described as “equally pressing” for Ireland’s new government.
“The main barrier for Ireland is our capacity to deliver projects effectively,” the report said. “Rising capital costs, if coupled with uncertainty and delays, will stifle business investment.
“Nonetheless, Ireland has clear potential to remain competitive in the coming years, with a skilled and growing workforce, a reputation for openness, a stable political environment, abundant energy potential and a commitment to improving national infrastructure.”
Ibec said the State had the financial resources and skills necessary to “unlock our economic potential for the first time in the State’s history”.
“It is critical key commitments in the new programme for government for an action plan for competitiveness and productivity, measures to enhance the speed and effectiveness of infrastructure delivery, and reducing redundant or excessive regulatory burdens on business are advanced with a clear sense of purpose and a renewed energy by the new government,” it added.
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