Ken O'Flynn (Cork North-Central, Independent Ireland Party)
Link to this: Individually | In context

234. To ask the Minister for Finance his assessment of the degree of exposure of the Irish economy to external trade shocks arising from multinational dependency and international trade tensions; the contingency plans that exist to safeguard employment and Exchequer revenues in such a scenario; whether diversification of inward investment forms part of the Government’s current economic strategy; and if he will make a statement on the matter. [51022/25]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

The EU and US have now reached a deal on reciprocal trade. While the imposition of tariffs is, of course, regrettable, this deal represents a more optimal outcome for households and firms than the alternative landscape that would have almost certainly included higher tariffs, scope for retaliation and escalation and ultimately a higher degree of uncertainty.

Having said that, the more challenging international economic landscape - including the introduction of tariffs - will, of course, weigh on growth in employment and tax receipts over the coming years. Indeed, as a highly globalised economy, Ireland is exposed to any reversal of the global economic integration which has helped to transform living standards in recent decades. With regards to exchequer revenues, as I have stated on many occasions, the growth we have seen in corporate tax receipts in recent years cannot be relied upon. Addressing the risks around volatile corporation tax is a central pillar of Government’s fiscal strategy.

In order to assess the impact of fragmentation and deglobalisation, my Department and the ESRI published analysis on the potential impacts of tariffs and other protectionist measures in March. Overall, the paper estimated that the domestic economy would be around 1-2 per cent below the no-tariff baseline over the medium-term depending on the scenario. The analysis also suggests that the impact on overall tax receipts would be broadly similar to the effects on the macroeconomy. However, it is important to note that the model does not fully take account of firm, product and sector-specific factors which can have a significant influence on activity in an Irish context.

My Department will publish updated macroeconomic forecasts alongside the Budget next month, which will inter alia incorporate the estimated impact of the introduction of 15 per cent tariffs on the Irish economy.

Given the more challenging external backdrop, it is essential that we boost the resilience of the Irish economy. That is why Budget 2026 will focus on investment. This will help maintain competitiveness and boost productivity which is the foundation for long-term improvements in living standards.

Indeed, the Government has already been making significant strides in this regard. In July, Government set out in the National Development Plan, its plan to invest in the strategic objectives of energy, water, housing and transport.

More recently, the Taoiseach, the Tánaiste and Minister Burke launched the Government’s Action Plan on Competitiveness and Productivity - a whole-of-Government plan focusing on the domestic drivers of competitiveness.

Last month, the Government launched the Action Plan on Market Diversification which outlines the key areas on which we need to focus our efforts to ensure continued resilience and diversification. Finally, we must continue to build up our fiscal buffers including through transfers to the Future Ireland Fund and the Infrastructure Climate and Nature Fund.