Foreign Investment Lifts Irish Outlook
Photo: Unsplash
The Central Bank of Ireland has upgraded its forecast for domestic economic growth, citing a stronger outlook for investment by multinational companies. The revision highlights the continued importance of foreign capital in supporting Ireland’s economy, even as domestic momentum shows signs of easing.
Domestic growth forecast revised higher
According to the central bank’s quarterly bulletin, modified domestic demand, or MDD — the most accurate gauge of Ireland’s underlying economy — is now expected to grow by 3.9% in 2025. This marks a one percentage point increase from the previous forecast. Growth in 2026 is projected at 3%, up from an earlier estimate of 2.2%.
The upward revision reflects stronger-than-anticipated investment activity, particularly from multinational firms operating in Ireland.
US multinationals remain central
The central bank attributed much of the improved outlook to investment by US-based multinationals, including major technology and pharmaceutical companies such as Apple and Pfizer. These firms continue to exert an outsized influence on Ireland’s small, open economy, despite policy signals from Washington aimed at encouraging the reshoring of production and profits.
Officials cautioned that some of the investment may be one-off in nature, including spending on software, research and development.
Construction and public spending add support
Stronger construction activity and higher-than-expected government expenditure in 2025 also contributed to the improved forecast. Together, these factors are helping to offset weaker growth in domestically focused sectors.
Domestic momentum shows signs of easing
At the same time, the central bank noted that growth in the domestic economy is slowing, reflecting weaker employment gains and softer activity in internal sectors. This view aligns with forecasts from business groups and research institutes, which expect MDD growth to moderate further in 2026.
Capacity constraints limit long-term gains
The central bank warned that Ireland’s economy continues to face significant supply-side constraints. Addressing issues such as infrastructure, housing and labor availability will be critical to ensuring that growth translates into sustainable improvements in living standards.
As International Investment experts report, Ireland’s upgraded outlook underscores the resilience provided by foreign investment. However, without progress on supply-side reforms, the gap between multinational-driven growth and the domestic economy could widen, limiting the country’s long-term economic potential.