Bernard Durkan (Kildare North, Fine Gael)
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217. To ask the Minister for Finance the extent to which Ireland continues to be an attractive location for foreign direct investment; the regions from which most competition occur in this area; and if he will make a statement on the matter. [46530/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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Ireland has long established itself as a market of choice for foreign direct investment and FDI makes a highly significant contribution to the domestic economy. Ireland’s ability to attract and retain FDI reflects our strong legal and regulatory landscape, our track record as a stable and pro-enterprise jurisdiction, and our talented and flexible workforce. These unique features continue to support our competitive advantages, which are recognised and valued by the multinational sector.

While large parts of the domestic economy were shut down during the Covid-19 pandemic, the resilience of the multinational sector proved remarkable, with the sector supporting the economy during the worst of the crisis and helped to bolster Ireland’s transition from the pandemic. Whilst the outlook in the domestic economy improved somewhat as restrictions were lifted at the beginning of this year, the onset of the war in Ukraine fundamentally altered the economic outlook, representing a large supply-side shock to the global economy.

The primary channel through which the conflict has impacted the Irish economy is via elevated energy and other commodity prices. Higher prices have undermined the profitability of business, with costs rising in both the Irish manufacturing and services sectors. However, higher inflation is not only affecting the competitiveness of businesses in Ireland, but is also impacting on the competitiveness of businesses in most advanced economies, with the euro area, the US, and the UK all recording inflation levels of at least 9 per cent in August.

Fortunately, Ireland has entered this period of uncertainty in a position of strength. The Irish modified current account, which strips out the distorting effects of globalisation, is in a strong position and is expected to remain in surplus over the medium term. Irish exports have recorded a robust first half of 2022, with a continued strong performance in the multinational sector and significant growth in the traditional sector. However, we cannot become complacent and I am very aware of the importance of maintaining our competitive position on the international stage.

Domestically, there is a real risk that a wage-price spiral emerges as a result of persistently-high inflation. This would damage our cost competitiveness and hamper the economy’s ability to compete in the global market place. My Department will continue to monitor risks to Ireland’s competitiveness closely, and respond as needed to protect Ireland’s attractiveness for FDI.