The Irish economy contracted by 0.3 per cent in the third quarter as the multinational export surge linked to US tariffs unwound.
The reversal was slightly larger than a preliminary estimate of -0.1 per cent published in October.
However, gross domestic product (GDP) was still up 10.8 per cent year-on-year in the third quarter.
The volatile numbers come on the back of a surge in activity and exports seen earlier in the year as pharma firms here rushed to stockpile product into the US ahead of tariffs.
RM Block
This trend had been expected to taper off in the second half of the year.
“GDP growth remains volatile but is reflective of the shifts in global trade patterns caused by the imposition of US tariffs in 2025, and the emergence of weight-loss drug production in Ireland,” AIB’s chief economist David McNamara said.
[ Irish economy forecast to grow at eight times euro area averageOpens in new window ]
He noted that a specific hormone derivative product related to weight loss drugs accounted for 56 per cent of all Irish chemical and pharma exports to the US in the first half of 2025, compared to just 8 per cent in the corresponding period last year.
“The rise in global demand for these drugs could underpin Irish pharma exports in the near term and may offset some of the negative effects of US tariffs in other sectors,” Mr McNamara said.
The latest Central Statistics Office (CSO) figures indicated that headline GDP fell by 0.3 per cent between July, August and September as activity in the pharma-dominated “industry” sector fell.
Output in the “industry” sector contracted by 0.7 per cent when compared with the previous quarter, the agency said, while the information and communication sector posted an increase of 0.6 per cent.
The CSO noted that there was a mixed picture for the domestic economy in the third quarter with modified domestic demand (MDD) growing by 2.3 per cent during the quarter, driven by capital formation.
However, personal spending increased by a more modest 0.1 per cent while real wages declined by 0.1 per cent, it said.
Will the Government’s new plan speed up the delivery of vital infrastructure projects?
On an annual basis, MDD was 5 per cent higher than the same period in 2024.
Total exports increased by 2.1 per cent in the third quarter while imports grew by 10.4 per cent which meant that overall net exports for the quarter were 14.6 per cent lower when compared with the previous quarter.
Commenting on the figures, Tánaiste and Minister for Finance Simon Harris said: “Today’s figures confirm the continued resilience of the domestic economy. Modified domestic demand grew by 5 per cent in the third quarter on an annual basis.”
“While this may overstate the underlying performance of the economy at present, I am encouraged by the strength of consumer spending which grew by 2½ per cent over the same period,” he said.
“Alongside the robust exchequer figures released yesterday (Wednesday), today’s figures highlight the relatively healthy position of our domestic economy at present,” Mr Harris said.
The Department of Finance is predicting the economy will grow by almost 11 per cent in traditional GDP terms this year on the back of the front-loading of exports seen in the early part of 2025.
However, growth is predicted to fall to less than 1 per cent in 2026.
The surge in multinational activity saw the Government collect a record €10 billion in corporation tax in November.
The latest exchequer returns, published on Wednesday, also indicated rises in income tax and VAT reflecting the relative health of the domestic economy.
“On US tariffs, Ireland’s effective tariff remains close to zero, and among the lowest of the wealthy OECD (Organisation for Economic Co-operation and Development) countries, given pharma products have yet to be hit with tariffs,” Mr McNamara said.
“This remains a key downside risk for the economy in the year ahead if the US reignites its trade war with the EU and other key partners,” he said.
