Economy slips into contraction in the fourth quarter of 2025

GDP shrinks in Q4: Ireland's GDP declined 3.8% on a seasonally adjusted quarter-on-quarter basis in Q4, following a flat reading in the previous quarter. Q4's reading was the weakest since Q2 2020. On a year-on-year basis, economic output expanded 2.2% in Q4, following 11.2% growth in the prior quarter. Over 2025 as a whole, GDP growth picked up to 12.3% from 2024’s 2.6%, marking a four-year high.

Easing export frontloading weighs on GDP in Q4: Compared to the previous period's data, figures in Q4 worsened for government consumption (+0.3% on a seasonally adjusted quarter-on-quarter basis vs +1.5% in Q3), fixed investment (-4.6% vs +13.4% in Q3), exports of goods and services (-3.4% vs +2.4% in Q3) and imports of goods and services (-1.3% vs +10.4% in Q3). In contrast, the reading for private consumption improved in Q4 (+0.9% vs +0.4% in Q3). The Q4 GDP contraction was mainly driven by a sharp drop in exports—marked by goods shipments falling at the sharpest rate in two-and-a-half years—alongside a decline in multinational activity, following the cooling of frontloading driven by U.S. tariff hikes.

Economic growth to slow sharply in 2026: GDP is expected to return to growth in sequential terms in Q1 2026. In 2026 as a whole, GDP growth is set to slow sharply from 2025. Our panelists have revised down their forecasts recently, reflecting the impact of higher fuel prices linked to the U.S.-Iran war. That said, government spending should be supported by nearly EUR 10 billion in fiscal stimulus. Higher U.S. pharmaceutical tariffs and persistent supply disruptions in the Middle East pose downside risks.

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