The Bank of Ireland has updated its growth forecast for Ireland’s economy this year, predicting a stronger performance than previously expected.
The bank now expects modified domestic demand (which measures the overall demand for goods and services in the economy) to grow by 4%, up from its earlier estimate of 3%. This shows an improvement in economic activity within the country, particularly in areas like consumer spending, investment, and government expenditure.
The bank also forecasts that employment will grow by 2.2%, meaning more people are expected to find jobs in 2025. When it comes to the overall economic size, measured by Gross Domestic Product (GDP), which includes the activities of multinational companies operating in Ireland, the bank predicts a 4.3% increase.
One of the standout predictions is related to the housing market. The Bank of Ireland expects 45,500 new homes to be completed this year. This represents a significant increase compared to the 30,000 homes completed in 2024, and it is expected to drive higher investment spending in the economy.
Consumer spending is also expected to rise by 3%. This is largely due to a forecasted 4.5% increase in wages, meaning people will have more money to spend on goods and services.
Conall MacCoille, the bank’s Chief Economist, commented on the stronger-than-expected performance of the Irish economy in late 2024, saying, “The Irish economy had far more momentum in late 2024 than expected, recording an exceptional pace of job creation.” He also highlighted that exports have been doing well, which contributed to the bank’s decision to revise its GDP growth forecast upwards.
MacCoille pointed out that wage growth in Ireland is now outpacing inflation. This is good news for Irish households, as it means that their purchasing power is improving. He explained, “Irish households should enjoy real income growth in 2025, aided by Budget 2025 tax cuts.”
However, there are some potential risks to this positive outlook. MacCoille mentioned that global trade tensions, such as ongoing trade disputes between major economies, could pose a challenge to Ireland’s economic growth. But he added, “Far more radical tariff/tax proposals from the Trump administration would be required to harm the economy in 2025.”
In summary, the Bank of Ireland’s updated forecast paints a more optimistic picture for the Irish economy in 2025, with higher growth in domestic demand, employment, and consumer spending. While there are risks from global trade tensions, the outlook remains positive overall.