Ireland: Selected Issues

This Selected Issues paper analyzes the impacts of AI, trade policy, and the energy transition in Ireland. Ireland’s macroeconomic response to recent tariff and trade agreement shocks is expected to remain modest, largely because the affected measures have limited impact on its key export sectors, resulting in relatively small effective tariff increases. In contrast, AI-driven productivity gains have the potential to become a major long-term driver of economic growth, competitiveness, and export expansion, particularly in knowledge-intensive and tradable industries where Ireland already holds comparative advantages. However, realizing these gains requires managing structural adjustments, including factor reallocation and distributional effects. Carbon pricing plays a critical role in ensuring that productivity-led growth does not lead to persistently higher emissions or greater dependence on fossil fuels. Sustained investment in renewable energy generation, electricity grid modernization, and stronger integration of European energy markets is essential to meet rising electricity demand from AI and digitalization. Expanding climate policy coverage and effectively implementing carbon pricing will enable Ireland to reconcile robust productivity growth with its decarbonization and energy security objectives.