(MENAFN- The Peninsula)
The Washington Post
DUBLIN: The Central bank of Ireland revised growth upwards Tuesday, but warned that potential US economic policy changes create significant downside risks to the public finances and the economy.
Modified domestic demand, or MDD, is expected to grow 3.1% in 2024, according to the central bank's quarterly economic bulletin, up 0.7 percentage points on its previous quarterly report. It is forecast to grow by the same amount in 2025, before moderating to an anticipated 2.7% in 2026, the report said.
MDD is deemed a more accurate measurement of homegrown activity due to the high number of multinationals based in Ireland that distort gross domestic product figures. Those companies, such as Apple Inc. and Pfizer Inc., have in part contributed to Ireland's economic success story, as it nears full employment and boasts one of Europe's only budget surpluses off the back of expected record corporation tax receipts.
However, looking ahead, the risks of an economy nearing capacity and an over-reliance on those companies are only exacerbated by any potential changes from the incoming Donald Trump administration, the central bank warned in its quarterly bulletin. The US is Ireland's largest bilateral trading partner and an escalation in global trade tensions would lower net exports, the bank said.
The economy is operating above its potential as infrastructure constraints limit further growth, the central bank also warned, referring to bottlenecks in the housing, health and utilities sectors. Ireland suffers from an acute housing crisis that has been exacerbated by a shortage of supply, having a knock-on effect in other parts of the economy.
“While specific policy actions of the incoming US administration are yet to emerge,” Robert Kelly, the bank's Director of Economics and Statistics, said in a statement,“higher tariffs or changes in tax regimes that reduce the profitability of US MNEs operations in Ireland could influence future investment decisions by those companies here, employment levels in their Irish operations and, most immediately, the related tax receipts to the Irish exchequer from their activities in Ireland and globally.”
The new presidency has caused concerns as prospective plans to reduce US corporation tax to Irish levels could impact the companies that make up a large percentage of the country's corporation tax take. Howard Lutnick, the president-elect's pick to lead the Commerce Department, singled out Ireland for criticism last month, saying it ran a surplus at the US's expense.
Central bank governor Gabriel Makhlouf recently warned of the risks, telling journalists in a December press conference that“a protectionist and fragmented world has negative implications for economic activity domestically.”
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