Bank of Ireland has raised its economic growth forecast for 2025, reflecting stronger-than-expected performance in several key sectors.
The bank now predicts that modified domestic demand, which excludes the impact of multinational activity, will grow by 4% this year, up from its previous forecast of 3%. In addition, employment is expected to increase by 2.2%, and the overall Gross Domestic Product (GDP), which includes multinational contributions, is forecasted to grow by 4.3%.
One of the standout projections is a sharp increase in housing activity. Bank of Ireland expects 45,500 new homes to be completed in 2025, a significant rise from the 30,000 homes built in 2024. This surge in housing completions is expected to drive a boost in investment spending across the economy.
The bank also forecasts a 3% rise in consumer spending, driven in part by a 4.5% increase in consumer wages. Chief Economist Conall MacCoille noted that Ireland’s economy ended 2024 with much more momentum than anticipated, particularly in terms of job creation. The country’s export sector has also performed well, prompting an upward revision in the GDP growth forecast.
MacCoille emphasized that the pay growth now outpaces inflation, suggesting that Irish households will experience real income growth in 2025, aided by tax cuts from the recently passed Budget 2025.
Despite these positive outlooks, MacCoille cautioned that global trade tensions could pose risks to the forecast. He specifically pointed to the possibility of more aggressive tariff or tax policies from the US, which could disrupt global trade and potentially affect Ireland’s economy.
Overall, Bank of Ireland’s revised forecast paints a picture of a resilient Irish economy with strong domestic growth, robust consumer spending, and a promising housing market, while also acknowledging the uncertainty of international trade relations.
