Paschal Donohoe (Dublin Central, Fine Gael)

I thank the Cathaoirleach for the opportunity to attend a meeting of the committee to discuss Ireland’s economic performance. The global trade environment we now face looks very different from what we became accustomed to in recent decades. It is one increasingly characterised by economic fragmentation, polarisation and self-reliance. This is very different from the old norm of deeper and deeper integration that was successful in lifting billions out of absolute poverty. Tariffs, which are taxes on imports, are a symptom of a new normal. Their introduction is regrettable. They drive up prices for consumers and businesses and create lose-lose outcomes. They run the risk of generating tit-for-tat responses and are almost always regressive.

As the committee will be aware, trade policy is a European Union competency. The Tánaiste is working with his counterparts in the member states and with Commissioner Šefovi towards agreeing a negotiated solution that will benefit those on both sides of the Atlantic.

Let me turn now to developments in the Irish economy. Despite trade, geopolitical and other challenges, incoming data confirm a strong start to the year. On an annual basis, the economy added 90,000 jobs in the first quarter, bringing the level of employment to 2.8 million. Never before have so many people been at work in Ireland. On the prices front, inflation has been at or below 2% for over a year now. Our budgetary figures remain in the black thanks to sensible management by the Government and the hard work of the people of Ireland. Looking ahead, however, the outlook for this year and next year is dominated by uncertainty. Earlier this month, my Department published its spring forecasts, as part of annual progress report. The key message from our analysis is that uncertainty is prompting households to increase precautionary savings and firms to delay, or even postpone, investment. This means that even in the absence of further tariffs, we have revised downwards our projections for growth this year.

The baseline forecasts were produced during March on the assumption that transatlantic tariffs would be introduced. On this basis, modified domestic demand, which is the figure for the Irish economy minus the figure for the accounting effects of larger companies, is set to grow by 2.5% this year and 2.75% next year. My Department published an alternative scenario that included a 10% tariff on US imports from the EU in most sectors. In this scenario, growth is expected to be around 1.5% lower than in the no-tariff baseline scenario by the end of 2026. Unfortunately, that scenario is now exceeded in the current tariff outlook. The impact on the Irish economy would be far more severe if US tariffs on EU goods were to increase to 50%, as was suggested late last week. There is simply no precedent from which to make confident projections of the impact of trade de-coupling. I have stressed that the numbers set out in the annual progress report are as much scenario analysis as firm forecasts at this point.

Let me turn to what we can do. Against the backdrop I have outlined, we have to double down on our ability to make Ireland attractive and create good jobs here. This means a greater focus on our competitiveness, most notably on those areas we can influence. I am talking here about improving our energy and water infrastructure, boosting our transport and housing stock, simplifying our regulatory environment and ensuring labour costs increase in line with productivity. We will also continue to invest in education, skills and training to boost our human capital. We must build up safety in our public finances, including through transfers to the Future Ireland Fund and the Infrastructure Climate and Nature Fund.

It seems as if we have been in a permacrisis for about a decade or so – from Brexit and the pandemic to energy prices and trade disruption – but the evidence is clear that our economy has been resilient and has recovered. A record number of people are at work and the public finances are currently healthy. That is not to deny for a second that there are many problems. I am well aware of the many challenges, including with housing. We are entering a period of economic turbulence and higher uncertainty. Overall, we are entering it from a position of economic strength.