What is the economic outlook for Ireland in 2025?

At the dawn of a new US Trump presidency, a struggling European economy and yet a buoyant Irish economy struggling with infrastructure challenges, what is the economic outlook for the year ahead?

This morning (22 January 2025) Bank of Ireland held a Market Update event focused on the Outlook for 2025 introduced by the CEO of Corporate & Commercial Banking John Feeney and hosted by Bank of Ireland Group Chief Economist Conall Mac Coille.

Conall was joined by Seamus Coffey: Economist & Previous Head of the Irish Fiscal Advisory Council, David Farrell, Chair and Professor of Politics at UCD, Lucinda Creighton, Former Minister of State for European Affairs of Ireland, CEO of Vulcan Consulting, and Paul Nicholson: Head of investment strategy, Davy Private Clients.

The event covered a broad array of topics, ranging from how the new Irish Government will tackle infrastructure and housing issues, whether the Trump presidency represents a threat to Ireland, how can Europe be more competitive, how are the financial markets performing and  when will the UK exit from the Brexit quagmire.

Conall’s key takeaways

• At the dawn of a new presidency, the trend is towards upwards growth in the US
• Europe is a very different story with sectors like manufacturing “in a bad place” and specifically car production in Germany facing steeper competition from China
• The European Central Bank has pared back growth predictions to 1.5% for 2025
• Continued wage growth of around 5% in Ireland raises concerns. “If that continues we will start to stand out from Europe and risk becoming uncompetitive over time.”
• Employment growth in the multinational sector has been flat for two years in a row. At the same time there has been buoyant growth in public sector employment
• When it comes to residential housing, we have been spending more but building less and National Development Plan critical infrastructure projects are slipping
• Ireland may be the best place in the world to do business for multinationals but this is not true for indigenous sectors – we need to be more competitive

Observations by the panellists

• Seamus Coffey: “Ireland’s economy is in a strong state, there is no need for stimulus”. That said, Government spending is at €105bn compared with €55bn in 2015 and this is only going in one direction – up. The amounts of taxes the country is collecting are extraordinary but “given our history, we tend to get things wrong in the good times. Being transparent would help and broadly make sure we don’t make new mistakes.” On the property front, we need to be paying greater attention to the private rental market. The listings for properties that are for sale are far greater than those for rent.
• David Farrell: Politically and economically, Ireland faces a positive future because we have a Government that is centre-right facing a left-wing opposition. “For the first time in our history we have a real ideological divide between left versus right. This keeps the far-right populists at bay.”
• Lucinda Creighton: Ireland’s inability to deliver on infrastructure is a cause for concern. The jury is out on whether the Government is capable of resolving these issues. “If it doesn’t deliver and we end up with a worse housing crisis, the so called ‘centre’ will be in trouble. The good thing at least is the independents who are propping the Government up aren’t going to block it. But will we build that road between Limerick and Cork? I’m not sure, but I’m hopeful.”
• Paul Nicholson: Growth and inflation rates in the economy are in a better place. We are looking at real growth of around 3% while inflation has calmed to 3% to 4%. “I view it like a fireplace. It’s good when it is well stoked and you can even cook your food. But if it gets out of control it becomes a real problem. Right now it’s very much under control.”