GDP shrinks for the first time in over a year

GDP reading: According to a preliminary reading, GDP fell 1.0% on a seasonally adjusted quarter-on-quarter basis in Q2, marking the first contraction since Q4 2023. However, the decline was less sharp than expected by economists, and probably reflects an unwinding of export frontloading, which pushed up GDP 7.4% in Q1. Moreover, Irish GDP statistics are volatile and subject to large future revisions. On an annual basis, economic growth fell to 12.5% in Q2 from 20.0% in Q1.

Drivers: According to the statistical office, the output of multinational firms shrank in Q2. Irish exports to the U.S. surged through March before plummeting through June, as American firms bolstered their inventories at home ahead of Trump’s tariffs.

GDP outlook: Our economists expect the economy to remain in a downturn for the rest of the year. Export frontloading is likely to continue fading, and the uncertainty about U.S. tariffs will chill hiring, investment and demand from abroad, particularly in Q3. That said, the recent EU-U.S. trade deal will support the outlook, with the two blocs reaching an agreement on pharmaceuticals, a key industry for Ireland.

Panelist insight: EIU analysts said: “We expect Ireland to record a quarterly GDP contraction in the third quarter and slight growth in the final three months of 2025; however, very high exports and investment growth in the first quarter will support annual GDP figures.”

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