Goodbody Stockbrokers has upgraded its growth forecasts for the Irish economy on the back of stronger-than-expected consumer spending while warning of potentially “softer FDI (foreign direct investment) trends”.
In its latest outlook report, the company projected the economy would expand by 3.6 per cent this year in modified domestic demand (MDD) terms, up from a previous forecast of 3 per cent, with growth of 3.2 per cent and 2.9 per cent forecast for 2026 and 2027.
“Ongoing strength in the labour market, aided by buoyant population growth, is playing an important role in consumer spending, while Government is playing an outsize role given the limited spare capacity in the Irish economy,” Goodbody chief economist Dermot O’Leary said.
However, he warned that job announcements by IDA-supported firms have slowed, reflecting global uncertainty and US incentives for domestic investment.
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“There may also be an unwillingness to publicly tout international expansion by US firms and instead focus on investment announcements in the US,” he said, suggesting public announcements may not be as good a guide as they have been previously.
On the upside, he noted that promised US tax reforms, including a lower corporate tax rate along with changes to the tax treatment of intellectual property (IP), both of which pose threats to Ireland’s economic model, have not materialised.
“Changes under the ‘One Big Beautiful Bill Act’ have been relatively benign, preserving incentives for IP-related activity in Ireland,” Mr O’Leary said.
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Following a period of exceptional policy uncertainty in the first half of 2025, he said “the fog appears to be lifting” on the major policy issues that threatened Ireland namely the imposition of tariffs and potential changes to corporate tax policy in the US.
“Risks prevail in relation to pharmaceuticals, but a 15 per cent tariff cap and some recent deals provide some clarity and guidance,” he said.
“More protectionist economic policies are a challenge for the Irish economy, but the risks around corporation tax receipts have reduced given the modest tax policy changes that the US Congress has voted through,” Mr O’Leary said.
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In its report, Goodbody said housing remains the most pressing domestic challenge.
“Apartments, critical for meeting urban density requirements, face viability hurdles that require targeted interventions. Government measures ranging from rent control reform to VAT reductions aim to bridge the gap, but private investment must play a larger role,” it said.
“Without it, the goal of delivering 50,000–60,000 units annually will remain elusive,” it warned.
“Given the excess capital and liquidity positions, the Irish banks have the capacity to increase development finance portfolios which would support the construction of more housing units and reduce the burden on the Government,” it said.
