Irish Economy Soared in 2025 on Weight-Loss Drugs Boom

Ireland’s GDP was 12.6% higher on year, the fastest expansion since 2021

Ireland’s economy soared last year, lifted by its close ties to the U.S. even as President Trump raised tariffs on imports from Europe and urged businesses to bring more of their overseas production back home.

There are few signs that Ireland has lost its appeal to overseas investors with a record number of new investments in 2025, a 38% increase on 2024.

The strength of Ireland’s performance highlights the often surprising response of the global economy to higher U.S. tariffs, with trade flows having held up much better than expected, as did growth.

Most economists expect to see a sharp slowdown in Irish growth this year, but to a level that would be strong by the standards of advanced economies. Much depends on the strength of demand for weight-loss and diabetes medicines in the U.S., and how rapidly the deployment of artificial intelligence raises revenues at big technology firms.

The Central Statistics Office Thursday said Ireland’s gross domestic product in 2025 was 12.6% higher than in the previous year, the fastest expansion since 2021, when it also benefited from a surge in demand for pharmaceuticals as the Covid-19 pandemic raged.

Although many countries have yet to report full-year growth figures, estimates and forecasts from the International Monetary Fund indicate that Ireland outpaced other advanced economies by some distance, and left it trailing only South Sudan and Libya, two countries that were recovering from conflict.

Ireland was not alone in benefiting from a surge in exports to the U.S. in the early months of the year as businesses tried to get ahead of an anticipated hike in tariffs. But it has also received a boost from an ongoing rise in U.S. demand for peptide-based hormones used in popular weight-loss drugs.

That surge has been large enough to have an impact on the eurozone economy and attract the attention of the European Central Bank as one reason for stronger-than-expected eurozone growth.

“We don’t know whether it’s entirely attributable to the weight-losing drugs that are largely exported or to other phenomena, but the contribution of exports has surprised on the upside,” European Central Bank President Christine Lagarde said.

The surge has also delivered another boost to the government’s revenues, with profit taxes up 17.2% on 2024. In the three months through September, government debt was equivalent to 32.8% of GDP, down from 40% a year earlier.

For much of last year, the prospect of higher tariffs on Ireland’s pharmaceutical exports was not the only worry confronting Irish policymakers. Trump had also declared his intention to bring production of drugs and other goods back to the U.S., threatening Ireland’s long-standing role as the European base for many of America’s largest companies.

But there are few signs as yet that Ireland has lost its appeal to U.S. and other overseas investors. IDA Ireland, the agency responsible for attracting and keeping foreign businesses, reported a record number of new investments in 2025 with 323 in total, a 38% increase on 2024.

The agency said that lower tax rates are no longer the key to Ireland’s appeal, instead emphasizing the availability of a highly-educated workforce.

“Ten years ago, a lot of the differentiator for Ireland was taxation,” said Matt Kennedy, head of client transformation at the IDA. “But now the core differentiator is talent. Talent has taken over. The taxation model can be replicated. It’s much more difficult to replicate the research ecosystem that’s in place.”

While it regularly delivers strong growth, there are risks involved in Ireland’s close economic ties to the U.S., and the major role played by a small number of very large U.S. businesses in its small economy.

In a report Tuesday, economists at Bank of Ireland said they expect the economy to grow by 2.8% this year and 3.5% next, but added that a contraction “can’t be ruled out.”

“Given volatile U.S. policy making, there is still a clear risk of further trade disruption,” the economists wrote.

However, it is also possible that demand in the U.S. and elsewhere for weight-loss drugs continues to strengthen, while the deployment of new technologies including AI could boost revenues for the big U.S. technology businesses that use the country as their European or international headquarters.

Write to Paul Hannon at paul.hannon@wsj.com