A “staggering” 12.1 per cent slump in Irish GDP dragged the Eurozone economy into an unexpected 0.2 per cent contraction in the first quarter, according to a revised estimate published on Friday.The European statistics authority Eurostat had originally estimated first-quarter growth at 0.1 per cent in the 21-country bloc compared with the previous three month-period. The unexpected fall was caused by an unprecedented slump in Ireland, where the latest estimate showed GDP contracted six times faster than the first projection.Ireland’s national accounts are notoriously volatile as they are distorted by cross-border financial flows stemming from multinational corporations that have their European headquarters in the country.Rory Fennessy, senior economist at consultancy Oxford Economics, called the 12.1 per cent contraction in Ireland’s GDP, compared with the fourth quarter of 2025, “staggering”. Ireland accounts for around 4 per cent of the Eurozone’s GDP.Excluding Ireland, “Eurozone growth remains remarkably steady at around 0.2 per cent per quarter”, Fennessy added in a note to clients.[ Don’t worry about a 12% fall in GDP, but watch unemployment closelyOpens in new window ]Claus Vistesen, of Pantheon Macroeconomics, said it was “impossible” to predict Irish GDP “with any accuracy”. The correction in Irish GDP was “inevitable” after an unexpected surge last year, he added.Bank of Ireland, the country’s largest lender, said the numbers “once again” provided no “meaningful guide” to the real performance of the economy, noting that the 12 per cent GDP plunge reflected just a small number of multinational companies in the pharmaceutical sector.Pharmaceutical companies with manufacturing facilities in Ireland had boosted their exports in 2025 ahead of US President Donald Trump’s trade tariff war but that trend is now “unwinding”, the BoI added.In the first quarter of this year, multinational-dominated sectors contracted by 27.1 per cent while domestic industries grew by 0.4 per cent, according to Ireland’s Central Statistics Office.The Irish government’s preferred metric of modified domestic demand, which covers personal, government and investment spending, grew by 0.6 per cent between January and March.Despite Friday’s revision to GDP, the European Central Bank is widely expected to increase interest rates next week for the first time in almost three years in an attempt to fight rising inflation.Inflation in the Eurozone rose to 3.2 per cent in May, above the ECB’s medium-term inflation target of 2 per cent for the third consecutive month. There is mounting evidence that inflationary pressures are spilling over from energy to other parts of the economy. Core inflation, which excludes energy and food, rose to 2.5 per cent in May.“The ECB sees it [as] necessary to get going with hikes to send a signal, and to not find itself behind the curve later on,” said Spyros Andreopoulos, founder of advisory firm Thin Ice Macroeconomics.Rising inflation implied that ECB policymakers were “nearing the ‘point of no return’ for a second hike” in interest rates after June, he added.Copyright The Financial Times Limited 2026