About the NTMA
Business Areas

Irish Economy and Public Finances

October 2025

  • Macroeconomic outlook

    • As we move through 2025, the Irish economy continues to demonstrate resilience despite the shifting global landscape. The US raised its average effective tariff rate from 2.4% to 15–20% in 2025 and, while trade agreements between the US and the EU have alleviated some uncertainty, global growth is expected to be below prior forecasts. The EU-US Framework Agreement outlines a 15% baseline tariff which applies to a majority of EU goods, with notable exemptions for some chemicals and agricultural goods relevant to Ireland. The EU has stated that the 15% ceiling will apply to any potential future tariffs on pharmaceuticals, including those based on Section 232.

      This trade agreement helps mitigate tail risks associated with significantly higher tariffs across most sectors and reduces the likelihood of a trade war extending into services. However, given the unprecedented scale of the proposed tariff shift its impact will hinge on the finer details. Any expansion in the scale or scope of tariffs could pose a risk to the Irish economy and public finances. Looking ahead, higher tariffs are expected to impact trade activity, while elevated uncertainty may weigh on investment spending. Counterbalancing these effects, a fiscal injection to address Ireland’s infrastructure deficit is set to support demand over the forecast horizon.

      Budget 2026 provides an evaluation of the potential impact of the 15% tariff rate, as well as the National Development Plan (NDP) on the Irish economy. It estimates a 1.25 percentage point (pp) hit to Modified Domestic Demand (MDD) relative to a no-tariff baseline alongside a 2pp decrease in employment. Working in the opposite direction, the positive impact of the NDP is estimated to increase both MDD and employment by 1.5pp in the medium term.

      In the first half of 2025 the most notable impact of tariffs on the Irish economy has been the increase in goods exports to the US, likely due to a front-loading of pharmaceutical products. As a result, GDP is forecast to grow by 10.8% in 2025 then slow to 1.0% in 2026 as base effects fade (Budget 2026). This volatility in Ireland’s headline GDP figures reflect the outsized role of multinational companies and the importance of Ireland’s trade relationship with the US. In 2023, the US accounted for 28% of goods exports and 48% of services imports, highlighting the structure of transatlantic goods and services flows. Chemical products, including pharmaceuticals, account for 75-80% of Ireland goods trade with the US. For the period January to August, goods exports to the US increased by 85% in 2025 relative to the same time period in 2024.

      Outside of the potential impact from tariffs, the domestic economy is expected to grow by about 3% in 2025, suggesting continued expansion in domestic activity despite external headwinds. MDD is forecast to grow by 3.3% in 2025 and 2.3% in 2026. Similarly, modified Gross National Income (GNI*) is forecast to grow by 3.3% in both 2025 and 2026 (Budget 2026). Domestic growth is supported by a range of indicators, including stable inflation around 2%, a strong labour market and continuing consumer spending.

      Consistent with continued growth in the economy, employment has increased over 2025. Nearly 64,000 people were added to the labour force in the year to Q2 2025, representing a 2.3% increase. The employment rate remains high at nearly 75%, largely supported by rising female participation and continued inward migration. Budget 2026 forecasts a continuation in this trend, with an increase in employment of 2.2% in 2025 and 1.5% in 2026. While there has been a small uptick in the unemployment rate since the start of the year, it continues to remain below 5% and is consistent with full employment. Nominal wages per head is forecast to grow by 3.7% in 2025 and 3.9% in 2026, supporting real income gains and helping households weather the cost-of-living pressures.

      Following the period of high inflation in 2022, which peaked at 9.6%, headline inflation has since stabilised to around 2%. HICP is forecast to be 1.8% this year and 1.9% in 2026. Core inflation is similarly estimated to be 1.9% in both 2025 and 2026. However, broader easing in inflationary pressures may be partially concealing the recent increase in specific components of the HICP, namely food and beverages.

      Stabilised inflation and subsequent real wage growth have also facilitated increased personal consumption. Budget 2026 estimates that consumer spending will increase by 2.9% in 2025 then softening slightly to 2.3% in 2026. In the face of continued uncertainty, households are likely to maintain elevated savings rates.

  • Key Economic Figures

    • 2024

      2025

      2026

      2027

      2028

      2029

      2030

      Consumer spending (% chg vol)

      2.9

      2.9

      2.3

      2.4

      2.4

      2.3

      2.3

      Government spending (% chg vol)

      5.3

      3.0

      3.0

      2.7

      2.3

      2.0

      1.8

      Modified Investment (% chg vol)

      -4.2

      4.7

      1.7

      4.4

      4.8

      5.2

      4.8

      Exports (% chg vol)

      8.6

      7.5

      1.5

      4.5

      3.2

      3.0

      3.0

      GDP (% chg vol)

      2.6

      10.8

      1.0

      4.2

      3.2

      3.2

      3.2

      Modified Domestic Demand (% chg vol)

      1.8

      3.3

      2.3

      2.9

      2.9

      2.9

      2.8

      Real GNI* (%chg vol)

      4.8

      3.3

      3.3

      2.5

      2.4

      2.3

      2.3

      Nominal GDP (€bn)

      563.0

      634.0

      653.0

      695.0

      733.0

      773.0

      816.0

      Employment (% chg)

      2.7

      2.2

      1.5

      1.2

      1.0

      0.9

      0.9

      Unemployment rate (% labour force)

      4.3

      4.6

      4.8

      4.9

      5.0

      5.0

      5.0

      HICP (% chg yoy)

      1.3

      1.8

      1.9

      1.9

      1.9

      1.9

      1.9

      GDP Deflator (% chg yoy)

      4.5

      1.7

      2.0

      2.1

      2.2

      2.2

      2.3

      General Government Balance (€bn)

      23.4

      10.2

      5.1

      -

      -

      -

      -

      General Government Balance (% GNI*)

      7.3

      3.0

      1.4

      -

      -

      -

      -

      Primary Government Balance (% GNI*)

      8.4

      4.0

      2.5

      -

      -

      -

      -

      General Government Debt (€bn)

      215.4

      209.4

      211.2

      -

      -

      -

      -

      General Government Debt (% GDP)

      38.3

      33.0

      32.3

      -

      -

      -

      -

      General Government Debt (% GNI*)

      67.1

      61.7

      58.6

      -

      -

      -

      -

      Average interest rate on stock of GG debt

      1.6

      1.5

      1.8

      -

      -

      -

      -


      Source: Department of Finance Budget 2026

  • Annual Public Finances

    • The Department of Finance’s Budget 2026 demonstrates the strength of the Irish fiscal position. Coupled with the resilience of the Irish economy, government surpluses are forecast to continue this year and next.

      In part as a response to heightened global uncertainty and the potential for knock on effects to the Irish economic model, Budget 2026 outlines an increase in government spending, including an allocation of €19.1 billion for capital expenditure under the revised NDP. This spending aims to address infrastructural bottlenecks and boost national competitiveness. Though Ireland’s public finances are in a strong position, the headline figures may mask some underlying vulnerabilities. Budget 2026 revised General Government revenue for 2025 upward to €146.4bn from €140.2bn in the APR, with almost all of the revision due to expected strong Corporate Tax receipts.

      Excluding CJEU proceeds, Corporate Tax receipts were €28bn last year and they are expected to be €32bn in 2025 and €34bn in 2026. Just over 20% of GG revenue comes from Corporate Tax now and it is estimated that over 50% of CT receipts come from just ten companies. Budget 2026 estimates “excess windfall” CT receipts to be €17.6bn (excluding CJEU proceeds) in 2025 and €18.7bn in 2026. This reinforces the much-discussed concentration risk in the Irish tax base. This reliance on multinational companies demonstrates the vulnerability in the Irish tax base to any change in corporate profit. Outside of these “windfall” elements, other tax sources are also expected to increase this year, though more modestly. Income tax is forecast to increase by 4.1% in 2025 and VAT by 4.5%.

      Strong revenues are matched by increases in government spending, particularly on infrastructure and other capital investments. General Government Expenditure is estimated to increase by 8.6% in 2025 and 8.1% in 2026, above nominal growth estimates. Budget 2026 outlines a scaling up of capital expenditure to address infrastructural bottlenecks and enhance competitiveness. For 2026, gross voted capital expenditure is set at €19.1 billion, in line with the Government’s plans for infrastructure investment.

      The NDP Review 2025, published over the summer, outlines total public investment of €275bn out to 2035 and represents Ireland’s long-term strategy for capital investment. For 2025 and 2026, the NDP plan sees increased GG public investment to €15.9bn and €19.6bn, representing annual increases of 13.2% and 23.5%. Overall, the updated NDP focuses on water, energy, transport and housing investment to meet the increasing demands on Irish infrastructure. Outside of Exchequer capital investment, the updated NDP will draw on funding from the CJEU Apple proceeds, the Infrastructure Climate and Nature Fund (ICNF) and proceeds from bank share sales.

      Taking both revenue and expenditure plans into account, the Department of Finance forecasts the General Government surplus to be €10.2 billion (3.0% of GNI*) in 2025. However, excluding the “windfall” element of CT receipts the underlying balance is estimated to be in deficit this year, at -€7.4 billion (2.2% of GNI*).

      To mitigate against this concentration risk, the Government has established two long-term investment funds: the Future Ireland Fund (FIF) and the Infrastructure, Climate and Nature Fund (ICNF). The aim is to ring-fence strong, but volatile corporate tax receipts to help alleviate spending pressures in the future. The FIF will be used to meet Exchequer costs from 2041 onwards, such as an ageing population and the digital and climate transitions. Each year 0.8% of GDP will be transferred to the FIF (estimated €4-€6bn per annum). The ICNF was seeded with €2bn from the National Reserve Fund and will be capitalised with €2bn a year from 2025 to 2030. The fund is more counter-cyclical in nature with a mandate to support State expenditure (i) where there is a significant deterioration in the economic or fiscal position of the State, and (ii) in the years 2026 to 2030, on designated environmental projects. In the past, Ireland has cut capital investment in downturns. This fund could act as a reserve to be drawn on for capital expenditure if a downturn arises. The transfer of €4.1bn and €2bn to the FIF and the ICNF were completed in 2025. They now stand at approximately €12.5bn and €4bn respectively.

      Following rapid growth in the last decade, Ireland has seen its debt sustainability metrics improve dramatically. Ireland’s debt-to-GDP ratio is expected to fall to 37.7% in 2025 and 35.9% in 2026, significantly reduced relative to a pre-Covid debt ratio of 57%. However, given the long-standing GDP distortions, Debt-to-GNI* is a more appropriate metric for evaluating Ireland’s debt sustainability. It has fallen from close to 170% in 2013 to c. 70% in 2024. Budget 2026 forecasts this to fall further to 65.3% in 2025 and 62.6% in 2026. At the same time, the weighted maturity of the debt stands above 10 years - one of the longest in Europe. Ireland’s annual interest costs have also fallen and are estimated at €3.3bn in 2025.

  • Key Annual Public Finance Figures

    • Description

      European
      System of
      Accounts
      (ESA)
      Code

      2024

      2025F

      2026F

      €bn

      €bn

      €bn

      Revenue

      Taxes on production and imports

      D.2

      35.7

      37.8

      38.6

      Current taxes on income, wealth

      D.5

      66.2

      72.0

      76.2

      Capital taxes

      D.91

      0.9

      1.2

      0.9

      Social contributions

      D.61

      23.0

      24.8

      26.3

      Property Income

      D.4

      2.4

      2.4

      2.2

      Other

      20.7

      8.2

      8.1

      Total revenue

      TR

      148.8

      146.4

      152.4

      Expenditure

      Compensation of employees

      D.1

      34.0

      36.7

      39.8

      Intermediate consumption

      P.2

      20.2

      21.8

      22.9

      Social payments

      D.6

      42.7

      44.7

      47.6

      Interest expenditure

      EDP_D.41

      3.6

      3.3

      3.8

      Subsidies

      D.3

      2.8

      3.0

      3.2

      Gross fixed capital formation

      P.51

      14.0

      15.9

      19.6

      Capital transfers

      D.9

      2.9

      5.5

      4.4

      Other

      5.2

      5.3

      6.1

      Total expenditure

      TE

      125.4

      136.2

      147.3

      General Government Balance (GGB)

      B.9=TR-TE

      23.4

      10.2

      5.1

      GGB as % of GNI*

      7.3%

      3.0%

      1.4%

      Underlying GGB (excl. CT windfalls) €bn

      -5.2

      -7.4

      -13.6

      Primary Balance (PB) €bn

      27.0

      13.6

      9.0

      Primary Balance as % of GNI*

      8.4%

      4.0%

      2.5%

      GNI* (bn)

      321

      339

      360


      Source: Department of Finance Budget 2026