Ireland’s Economic Growth Forecast Lowered Amid US-EU Trade Tensions, Central Bank Warns
Dublin: The Central Bank of Ireland has expressed concerns over the potential economic impact of the escalating trade war between the United States and the European Union, warning that it could hinder Ireland’s economic growth. The bank has revised its domestic economic growth forecast to 2.7%, a 0.5% decline from the previous year, citing rising uncertainty in the global trade environment.
Ireland’s Economic Sensitivity to US Trade Policies
Ireland maintains strong trade and investment ties with the United States, with significant foreign direct investment (FDI) from American multinational companies. As a result, the country’s public finances and labour market are highly sensitive to changes in US economic policy and global trade dynamics.
The newly announced US tariffs could result in an estimated €15 billion loss in corporate tax revenue from multinational companies operating in Ireland. The central bank warns that this poses a significant risk, potentially leading to economic shocks affecting government taxation and spending policies.
However, the bank also noted that, despite the downward revision, Ireland’s economic outlook remains more stable compared to periods of extreme uncertainty during Covid-19 and Brexit.
Inflation and Housing Market Concerns
In addition to adjusting growth forecasts, the central bank has revised its inflation projections, now estimating a 0.5% increase, bringing the inflation rate to 2.2%. This revision accounts for higher energy prices and rising service sector costs.
Housing Construction Expected to Decline
The central bank’s latest economic bulletin also highlights challenges in Ireland’s housing sector, warning that the rate of new home construction will decline over the next two years.
Key obstacles to housing supply include:
- Low productivity in the construction sector
- Delays in utility connections and planning approvals
- Shortage of zoned land in high-demand areas
The bank previously stated that Ireland needs to build 70,000 homes annually over the next decade to address housing shortages and meet population growth demands. However, the new projections indicate that:
- 35,000 homes will be built in 2024
- 40,000 homes in 2025
- 44,000 homes in 2027
Despite these challenges, over 30,000 homes and apartments are expected to be completed this year, supporting ongoing efforts to alleviate the housing crisis.
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