(Bloomberg) -- Ireland is disproportionately exposed to increased geopolitical risks, the Central Bank governor said Wednesday, pointing to the outsized number of multinational companies that are central to the domestic economy.
“A protectionist and fragmented world has negative implications for economic activity domestically,” Gabriel Makhlouf said in opening remarks at a press conference in Dublin.
The small, open economy relies on the billions of euros it receives in corporation tax receipts annually, primarily from the disproportionate number of multinationals based there, such as Apple Inc. This revenue drives “a significant share of growth, public finances and employment,” said Makhlouf, which leaves the country “particularly exposed to global developments.”
Concerns have been raised by economists and politicians about the potential impact incoming US president Donald Trump’s policies could have on Ireland. His plans to reduce US corporation tax to Irish levels could impact the companies that make up a large percentage of the country’s corporation tax take.
Howard Lutnick, the president-elect’s pick to lead the Commerce Department, singled out Ireland for criticism last month, saying it ran a surplus at the US’s expense. Changes to US policy could have implications for Ireland but it is too early to start predicting what they might be, Makhlouf told reporters.
Overall the Irish economy is growing strongly and modified domestic demand is expected to grow in 2024 and 2025, the central bank’s financial stability review published Wednesday said. It reiterated its concerns around expansionary fiscal policy, such as the government’s budget giveaways in October, at a time when the economy is already performing at capacity.
“Irish households and businesses have been supported by a growing economy, but are also exposed to global shocks,” Makhlouf added in the remarks. “A shock to international trade could have knock-on effects for the labor market here, as well as the performance of domestic firms.”
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