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Ireland

A regular Eurozone outperformer

Last update – January 2024

Country rating 


LOW RISK FOR ENTERPRISE
Economic risk

Very low risk of payments disruption
Business environment risk
Very low risk of payments disruption
Political risk

Very low risk of payments disruption
Commercial risk
Moderate risk of payments disruption
Financing risk
Low risk of payments disruption
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Form of state
 Parliamentary Republic
Head of government
 Leo Varadkar (Prime Minister)
Next elections
 2025, general

Strengths & weaknesses

  • Strong business environment
  • Robust current account surplus
  • Strong fiscal position
  • Sensitive to external shocks due to high openness to trade
  • High dependency on foreign investment
  • High house prices

Economic overview

Strong economy but external headwinds build

Ireland’s GDP is notoriously volatile because of large profit-shifting strategies by multinationals between Ireland and the rest of the world, which create large swings in intellectual property flows. As a result, even though Ireland’s GDP dipped in both 2023 and 2024, its underlying health remains strong.

The strong economic performance can be attributed to the presence of multinational corporations (notably in the technology, pharmaceutical, chemicals and financial sectors), solid exports to fast-growing markets such as the US, a skilled labor force, strong immigration inflows and a low structural unemployment rate.

However, Ireland may face a challenging 2025, with the US set to impose new tariffs on EU imports. The US is the largest export market for Irish companies by far. On the other hand, positive factors include the ECB loosening monetary policy, which will increasingly support private domestic demand as interest rates decline. Business insolvencies have picked up significantly in 2024 but are expected to decline in 2025 and 2026 as access to credit eases and borrowing costs continue to decline.

Moderate medium-run vulnerabilities

A key reason behind the sizeable presence of multinationals in Ireland has been its attractive low-tax environment, which has lured substantial foreign investment. However, in 2022, Ireland introduced changes to the international corporate tax framework, including the reallocation of profits of multinational companies across different states and an increase in the tax rate for very large companies from 12.5% to 15%. This could mean that higher taxes on the domestic economy are needed as corporate tax revenue is the second-largest single source of revenue, standing at more than half of the increase in total revenue since the Covid-19 crisis. On the positive side, the external account is strong: the current account surplus should continue to stay above 5%, thanks to the recovery in global trade, which should strengthen Ireland’s net exporter position.

In the medium run, Ireland’s trade structure remains a vulnerability in terms of the dependency on pharmaceuticals and computer services. In addition, in terms of destinations, export concentration is high as the US and the UK represent around 40% of total Irish exports. The very strong presence of the multinational sector makes Ireland appear very vulnerable in terms of external debt but being part of the Eurozone makes it manageable.

The fiscal balance should continue to register a surplus in the coming two years. Additionally, public debt has been largely kept under control, decreasing from pandemic peaks of 58% of GDP to around 42% in 2024, presenting an overall strong fiscal position. This should provide the country with strong buffers to mitigate future negative shocks hitting the economy and supporting the high valued added sectors.


An area of weakness is stretched affordability in the housing market. The Irish housing market is marked by a persistent imbalance between demand and supply. Housing supply remains critically low. New housing completions have slowed, raising concerns about the government's annual target of 33,450 units. The shortage of homes has intensified affordability challenges for buyers, despite recent reductions in mortgage interest rates.

Business environment and political developments

Ireland's business environment is notably strong, scoring highly in regulatory quality, rule of law and corruption control. Ireland also has a very well-educated labor force and enjoys a significant openness to foreign trade and FDI. In particular, starting a business, protecting minority investors, paying taxes and resolving insolvencies are ranked at the top among other OECD high-income countries. However, going forward, the introduction of the minimum global corporate tax reform is expected to modestly dampen Ireland's attractiveness, particularly for multinationals. Furthermore, a further decrease in taxation in the US under the Trump administration may erode Ireland’ competitiveness.

Ireland's recent political developments are centred around the aftermath of the 2024 general election, which highlighted a fragmented political landscape. Despite expectations, Sinn Féin's anticipated surge in support did not materialize. Instead, the centrist coalition of Fianna Fáil and Fine Gael emerged with relative strength but fell short of a majority, necessitating complex coalition negotiations.

Economically, the outcomes of these negotiations could influence Ireland’s policy direction on housing, public spending and climate action, especially with concerns about the cost of living and energy prices.

Trade structure by destination/origin

(% of total, 2023)

Trade structure by product

(% of total, 2023)

Contact 

Maxime Darmet
Allianz Trade
+33 1 8411-50 50
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