Our first Irish Economy Health Check of the year focuses in on the potential impact of policy change in the United States under the Trump Presidency.
The report assesses risks and opportunities and discusses the broader aspects of the Irish economy.
Risks skewed to downside for Ireland from Trump policies
Given its economic exposure to the United States, proposed policy reforms under the second term of President Donald Trump could have very significant implications for Ireland’s prospects and the Irish economic model in the coming years. Risks are skewed to the downside, including tariffs and corporate tax changes, but there are upside risks too from better US dynamism and increased profitability from US firms based in Ireland. We lay out upside and downside risks.
Ireland is the 51st State from an investment perspective
Ireland acts as a base for some of the largest US multinationals in the technology and healthcare sectors. Ireland has the largest share of workers employed by US firms in the EU as result. This presence, along with changes to international and domestic tax rules, supportive policies for Intellectual Property (IP) and growing profitability has resulted in record corporation tax receipts in Ireland. Corporate tax changes in the US bring the greatest risks for Ireland in our view. In the absence of reforms, corporate tax receipts in Ireland are expected to grow further.
Fiscal buffers and capital spending commitments should be priorities
There is significant uncertainty about the extent of policy change in the US, like the Brexit uncertainty post-2016. Irish policy efforts should focus on increasing fiscal buffers by diverting greater resources to sovereign savings funds and maintaining capital spending at 5% of GNI* to address infrastructure shortages.