Ireland's Economic Growth to Moderate as Infrastructure Bottlenecks Bite

Ireland's economic growth is expected to slow down, Bloomberg reports, citing a report by Ibec, the nation's main business lobby. Ibec's report points out the uncertainty in global trade and persistent infrastructure bottlenecks as key factors.

Ibec forecasts domestic demand, a more reliable indicator of Irish economic health than GDP, to grow by 3% in 2025, before moderating to 2.7% in 2026. This aligns with the recent forecast by the Central Bank of Ireland. The report highlights that after five years of continuous expansion, the Irish economy is experiencing a period of moderation.

The report identifies several challenges. Uncertainty surrounding trading partners is cited as one factor, but the most significant obstacle to growth is the bottleneck in critical infrastructure. The report notes a backlog of energy, transport, and water projects that are essential for businesses to thrive in Ireland. These infrastructure shortfalls exacerbate the country's vulnerability to broader global economic turmoil.

Ireland's highly open economy is heavily reliant on corporate tax revenue from multinational companies. The potential impact of US onshoring efforts under the new administration of President Biden is a significant concern. The potential for these companies to relocate their operations back to the US could further strain Ireland's economy.

The report highlights that the number of new jobs announced by the IDA, Ireland's inward investment agency, fell to 13,500 in 2024, down from 19,000 in 2023. Ibec attributes this decline in part to capacity constraints within the Irish economy.

"The main barrier for Ireland is our capacity to deliver projects effectively," said Danny McCoy, chief executive of Ibec, in a statement released Wednesday. "Rising capital costs, if coupled with uncertainty and delays, will stifle business investment."

Despite the challenges, Ireland is seeking to maintain its competitiveness by highlighting its skilled and growing workforce. However, the infrastructure bottlenecks, including delays in the planning system, are hindering the country's ability to attract and retain global businesses.