Ireland's deep economic ties to the US pose "notable downward risks," the European Commission's Spring economic forecast has warned.
The report flags that further US tariffs on pharmaceuticals could hit investment and cause "significant downside risks."
A weaker performance or a downsizing of the multinational corporate sector due to tariffs "would significantly affect tax revenues," the forecast suggests.
The report notes: "Ireland’s GDP is forecast to grow by 3.4% in 2025 and 2.5% in 2026 supported by a strong labour market."
"However, the high uncertainty and deterioration in global trading conditions are expected to detract from growth.
"Moreover, Ireland’s deep economic ties to the US pose notable downward risks in the context of rising protectionism.
"The general government balance is forecast to remain in surplus, though significant risks arise from the uncertain outlook for corporate tax revenues."
The report then warns about the reliance on the multinationals to maintain our tax income levels.
"A weaker performance or a downsizing of the multinational-dominated sectors would significantly affect tax revenues, which is a key risk to the fiscal outlook," it said.
"The outlook for corporate income tax revenues is particularly uncertain, given their concentration among a relatively small number of large multinational companies and a large portion estimated to be windfall, i.e. beyond what is explained by underlying domestic economic activity."
Employment is set to continue expanding into 2026, "albeit at a more moderate pace, reflecting the expected expansion in the domestic economy.
"That said, the Irish labour market remains sensitive to a potential slowdown in exports," the report notes.
Inflation is also expected to remain low as the report forecasts: "Looking ahead, lower prices for non-energy industrial goods and decreases in commodity prices are expected to dampen inflation, and headline inflation is forecast to reach 1.6% in 2025 and 1.4% in 2026."
The report also predicts the budget surplus is set to recede to 0.7% of GDP this year and to just 0.1% of GDP in 2026.
*This article was originally published on BusinessPlus.ie.
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