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Economy to grow faster than expected this year – Goodbody
The Irish economy will grow faster than anticipated this year as impact of US tariffs will not be as damaging as feared and the country “dodged a bullet” on US corporation tax changes, according to a new report by Goodbody Stockbrokers.
Due to the strong jobs market and a rising population, the domestic economy will expand by 3.6% in 2025, up from an earlier forecast of 3%.
The report added that growth will remain healthy at 3.2% next year and 2.9% in 2027.
Goodbody’s chief economist Dermot O’Leary said the worst of the tariff fears have not materialised following an agreement to impose 15% tax on EU goods entering the US.
While the tariff was a “significant barrier” to trade it was “far less severe than the punishment once threatened.”
Mr O’Leary said the Trump administration’s failure to get corporation tax changes through the US Congress meant measures which could have undermined Ireland’s competitiveness have been shelved.
“There was a real risk at the start of the year that the US could introduce tax changes that would have very detrimental impacts on the Irish economy,” said Mr O’Leary. “The Big Beautiful Bill that was passed in Congress over the summer, to our reading, looks relatively benign from an Irish perspective – so the fog has lifted somewhat in relation to that.
“On the tariffs point, we have to remember the vast majority of Irish exports to the United States do not have tariffs attached to them because they’re in the pharmaceutical sector.
“There is still uncertainty about that particular sector, but again there is some clarity that has emerged over the last number of months.”
However he said the tax and tariff changes could pose a longer-term challenge to the Irish economy, as it may weaken the case for future multinational investment here.
“When you go back and look at Ireland’s industrial model, I don’t believe it was to attract US companies here to export their goods and services back to the United States – it was to get advantage of the European market and exprot it to Europe and some parts of the rest of the world as well,” he said.
The Goodbody report said new job announcements by IDA-supported companies were down 16% year on year.
“But there is a difference between the information that, say the, IDA is giving us for the first half of the year and the public announcements,” he said. “There is an incentive for US companies to invest in the United States – and indeed to be seen to be investing in the United States – rather than in the rest of the world.
“So the headline statistics may not be giving us the right picture on that.”
On housing, Mr O’Leary said 33,845 homes will be built this year, rising to 37,272 next year and 39,126 in 2026.
He added that planning permissions had fallen to a five-year low in the second quarter of this year, increasing the risk of the Government undershooting its target of 303,000 homes between 2025 and 2030.
Mr O’Leary said rent reforms, changes to apartments standards and lower VAT on apartment sales should help ensure a “much bigger” contribution from the private sector.
On the public finances, the report notes Government spending will rise by 8.6% this year and 8.2% in 2026, far ahead of the Coalition’s long-abandoned 5% spending rule.
Mr O’Leary said this “spending creep” could lead to an over-heating in the economy.
“To give the Government credit it has announced a very ambitious spending plan in the form of the National Development Plan for the next five years,” he said. “But when you have those priorities in terms of capital spending, and at the same time you have an economy that’s almost at full capacity, then you have to have sacrifices elsewhere.
“Our preference would have been that current spending is kept in check more than it has been over the last number of years.”
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