By Emer Walsh,Irishexaminer.com

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“The outcome of these investigations, the potential for instability in global financial markets and the potential use of other regulatory mechanisms by the new US administration will all have a big impact on Ireland’s growth prospects in the coming years,” the business group said.

However, Ibec still expects to see growth in domestic demand of 3% this year and 2.6% in 2026.

Cooling labour market

The business group also noted a moderate cooling in the labour market, with unemployment rising marginally over the past three months. It said a similar cooling in new job growth can be observed in the number of positions remianing open but unfilled in the private sector, which decreased marginally this year to 0.9% of total employment.

In a similar trend, job postings and new job creation have slowed somewhat to an additional 42,000 jobs created in the first half of the year, compared to 48,000 over the same period in 2024.

“Looking to the future, a challenging business environment and the lagged effect of delayed investment decisions in the first half of the year will likely weigh on employment growth for the remainder of the year,” Ibec said.

While uncertainty remains, the business group pointed to a rise in consumer spending, which increased by 3% in the first half of 2025, with strong fundamentals continuing to drive activity.

Budget 2026

However, it noted that a softening labour market and a more targeted Budget package could lead to a slowdown in these fundamentals.

Speaking on the upcoming Budget, Ibec said it must be framed in the context of ongoing trade tensions, with a need to address the cost of doing business. While the broader economy may remain resilient, the group warned that some sectors will suffer significant and lasting damage to competitiveness.

Despite this, Ibec also pointed to major opportunities on the horizon, including the rise in AI, a more investment-driven EU, and Ireland’s repositioning withing shifting global supply chains.

“To capitalise on these, Ireland needs not only strategic vision but timely delivery in areas like infrastructure, innovation, and skills, while maintaining fiscal stability,” the group said, adding that Ireland still falls short of where it needs to be as an innovation leader and R&D performer.

“We must also use the tools available to attract investment. Enhancing the R&D tax credit is one such lever. Widening its scope to support all forms of innovation would provide a timely and material response to current investment challenges.”