Ireland GDP

Economy shrinks at record pace in Q1

Economy contracts at a record pace in Q1: According to a second release, Ireland's GDP shrank a record 12.1% in seasonally adjusted quarter-on-quarter terms in Q1, following a 4.2% contraction in the previous quarter and far sharper than markets had expected. On a year-on-year basis, GDP contracted 17.1% in Q1, following a 2.2% expansion in the previous quarter.

Pharma-dominated multinational sector shrinks: Compared with the previous period's data, figures in Q1 softened for private consumption (+0.6% on a seasonally adjusted quarter-on-quarter basis vs +0.8% in Q4) and exports of goods and services (-7.0% vs -3.7% in Q4). In contrast, readings picked up for fixed investment (-0.8% vs -4.1% in Q4) and imports of goods and services (+4.2% vs -1.0% in Q4). Finally, the variation in government consumption was the same as in the prior quarter (+0.4% in Q1 and Q4). The multinational-dominated sectors—which include pharmaceuticals, medical devices, electronics and IT services, and account for roughly half of Ireland’s economy—shrank 27.1% in the first quarter as export frontloading to dodge U.S. tariffs faded, driving Ireland’s record contraction. Modified domestic demand—an indicator that better reflects the underlying economy—expanded 0.6% quarter on quarter, a better result but still weaker than Q1’s 1.0% expansion. Household consumption continued to expand but lost momentum amid a higher unemployment rate, lower employee compensation and stronger average inflation following the Iran energy shock.

GDP expected to contract in 2026: Ireland’s economy is projected to resume growth in Q2 following a year-long downturn caused by swings in the multinational sector, rising by more than 1% in sequential terms through end-2026 thanks to the government’s fiscal stimulus and a low base effect. Nevertheless, GDP is still forecast to decline in 2026 overall, dragged down by the surprise Q1 drop. Ireland’s GDP data remains vulnerable to distortions from large multinationals’ operations. Persistently elevated energy prices linked to the Iran war pose a downside risk.

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