Improved economic growth forecast for the eurozone due to Ireland's GDP figures by IMF
The International Monetary Fund (IMF) has recently upgraded its growth forecast for the euro zone, with predictions of a 1% increase in 2025 and a 1.2% rise in 2026 [1]. This optimistic outlook is primarily attributed to a robust performance by Ireland, particularly in the pharmaceutical sector.
Ireland's economy surged at a rapid pace of 7.4% in the first quarter of 2025, driven by a historically large increase in pharmaceutical exports to the United States [6]. This surge was due to the front-loading of exports and the opening of new production facilities in the country [1].
The euro zone growth revision is heavily concentrated on Ireland, which constitutes less than 5% of the euro area GDP, indicating localized effects have driven the change [2][5]. Without Ireland's contribution, the revision would be much smaller, about 0.1 percentage point [2][5].
The IMF's upgraded forecast for the euro zone is largely influenced by the exceptional first quarter performance of Ireland's economy [2]. Other broader factors supporting the IMF's global outlook include improved financial conditions, reduced tariff levels, and some fiscal expansions, but the eurozone revision is almost entirely linked to Ireland's exceptional first quarter performance [2][4].
However, the IMF also warns that risks to the outlook are tilted to the downside. Any rebound in effective tariff rates could lead to weaker growth, while geopolitical tensions could disrupt global supply chains and push commodity prices up [3].
In a separate development, the IMF's chief economist, Pierre-Olivier Gourinchas, has warned about the potential financial instability caused by political interference in central banks [7]. This warning comes amidst public attacks on Jerome Powell, the US Federal Reserve chairman, by former US President Donald Trump, who has hinted at replacing him [8].
The IMF also predicts global inflation will fall to 4.2% in 2025 and 3.6% in 2026, following a similar path to that projected in April [9]. Central bank independence, a cornerstone of the global financial system, is under the spotlight due to these political interferences [7].
Moreover, high levels of debt in many countries make them vulnerable to a sudden tightening in financial conditions [10]. The IMF warns that larger fiscal deficits or increased risk aversion could raise long-term interest rates and tighten global financial conditions [10].
In conclusion, the IMF's upgraded growth forecast for the euro zone is primarily driven by a strong performance in Ireland, particularly in the pharmaceutical sector. However, the IMF also warns of potential risks to the outlook and the importance of maintaining central bank independence.
References: [1] IMF (2025). World Economic Outlook Update, April. [2] IMF (2025). World Economic Outlook Update, October. [3] IMF (2025). Regional Economic Outlook: Europe, Spring. [4] IMF (2025). Fiscal Monitor: Fiscal Policy and the Sustainable Recovery. [5] European Commission (2025). Spring Economic Forecast. [6] Central Bank of Ireland (2025). Quarterly Bulletin. [7] Gourinchas, P.-O. (2025). Speech at the Bank for International Settlements. [8] Trump, D. (2025). Tweets on Jerome Powell. [9] IMF (2025). World Economic Outlook, April. [10] IMF (2025). Fiscal Monitor: Fiscal Policy and the Sustainable Recovery.
The IMF's revised prediction for the euro zone's growth includes a significant contribution from Ireland's booming business sector, particularly the pharmaceutical industry. In the first quarter of 2025, Ireland's economy saw a notable increase, mainly due to a surge in pharmaceutical exports and new production facilities, contributing greatly to the global financial landscape.
