Manufacturing & Supply Chain

The Irish economy entered 2025 in a robust position with a strong labour market. However, the trend towards deglobalisation and protectionist trade policy is likely to adversely affect the Irish economy, according to the ESRI Quarterly Economic Commentary, Spring 2025.

• The ESRI’s baseline forecast is for Modified Domestic Demand growth of 3.0 per cent in 2025 and 2.8 per cent in 2026. This forecast assumes a continuation of current trade policy but does account for the damaging effect of higher uncertainty on global economic activity, investment and consumption.
• The ESRI provides a series of forecasts for an additional scenario of a 25 per cent bilateral tariff on goods. In this scenario, the ESRI forecasts Modified Domestic Demand growth of 2.8 per cent and 2.1 per cent for 2025 and 2026.
• The overall impact of tariffs will be greater for the Irish economy if the US specifically targets pharmaceutical products.

The inflation rate has ticked upwards in the early months of 2025 and it is now close to 2 per cent. The ESRI expects Consumer Price Index (CPI) inflation to rise by 2.0 per cent in 2025 and 2.2 per cent in 2026. Inflation is mainly concentrated in services rather than in goods, particularly in domestic non-traded services like restaurants and hotels.

The unemployment rate is projected to remain close to 4 per cent over the next year.

Commenting on the report, author Kieran McQuinn of the ESRI stated: “While the Irish economy is in a robust state, it faces significant uncertainty in light of changing international trading conditions.”

Author Conor O’Toole of the ESRI stated: “While the Irish economy entered 2025 in a relatively positive position, the outlook is clouded by international developments. Changes in US tariffs and policy will have a notable impact on Ireland and could hurt key sectors such as pharmaceuticals.”