The threat to Ireland’s foreign multinational-focused economy and public finances from the incoming U.S. administration has pushed the risks to the country’s favourable economic picture firmly to the downside, the Irish central bank said on Tuesday.
Ireland is especially exposed to President-elect Donald Trump’s pledges to slash corporate tax, incentivise industries to bring production back to the U.S and impose tariffs given its heavy reliance on the taxes and jobs of a small cluster of U.S. tech and pharmaceutical multinationals.
Ireland’s central bank said lower Ireland-U.S. trade flows as a result of tariffs or other changes affecting the activities of those companies could lower net exports, domestic investment, employment, tax revenue and economic activity.
This in turn could influence future investment decisions by those multinationals, which employ about 11% of Irish workers, the bank warned in its latest quarterly assessment of the economic outlook.
Central Bank Director of Economics Robert Kelly said he would have “a much keener eye” on the U.S. policy developments that could impact record levels of Irish corporate tax revenues which have handed the country the healthiest public finances in Europe.
Irish corporate tax receipts, which are mainly paid by U.S. firms, have increased almost seven-fold over the last decade, in large part due to those companies moving intellectual property (IP) assets to their operations in Ireland.
“The issue with that is, in essence, they (IP assets) are quite easy to move. We saw that in 2015 when we saw large moves to Ireland, it doesn’t involve building a factory necessarily, it doesn’t involve actually the movement of goods,” Kelly told reporters.
“So I would actually think it is the other element potentially of policy changes (rather than tariffs) that could be the most influential.”
The central bank added that the uncertainty around potential outcomes is high, and may only become clearer if and when specific policy decisions are taken in the U.S.
The bank gave the warning as it upgraded its 2024 forecast for modified domestic demand (MDD) – its preferred gauge of economic performance – to 3.1% from the 2.4% estimated in September due to stronger personal consumption, modified investment and employment.
(Reporting by Padraic Halpin）
