Ireland's dependence on multinationals and international exports means “global shocks” pose “a major challenge to the Irish economy”, a new report claims.
The Economic and Social Research Institute (ESRI) study looked at what could happen to the Irish economy over the next decade.
The think tank describes the outlook as “relatively favorable,” but the report's authors emphasized that it is a projection, not a forecast, and said that “the assumption that nothing will move the economy from its current trajectory is unrealistic.”
The report, titled Ireland's medium-term economic outlook: risks and opportunities, warns that the country is vulnerable to external risks and “unforeseen shocks”.
He said this is a particular issue because budget surpluses are based on extraordinary corporate tax revenues and “extraordinary taxes, by definition, could disappear quickly”, meaning that a €5 billion surplus could turn into a €13 billion deficit.
The presence of multinational corporations “remains tremendously positive for the Irish economy”, according to the report, but also highlights the importance of domestic companies in helping to “mitigate” economic risk.
The report focused on a number of scenarios that could affect Ireland's economy in the near future, including: a global slowdown, a loss of competitiveness between Ireland and its trading partners, and an exodus of multinational companies and a change in the productivity levels of Irish-owned companies.
The report also found that Ireland's economy has performed “remarkably” over the past 10 years, despite domestic and international challenges, including Brexit and the pandemic.
He said this had led to employment and population growth “which should be celebrated”, but also that the speed of population growth after “a period of low public investment following the great recession” had contributed to the housing crisis.
ESRI director Professor Martina Lawless said that, without surprises, the projections show “a reasonably positive continuation of growth, although at a more moderate level than in recent years.”
It also shows that “a number of quite plausible external risks could have significant repercussions on the economy.”
He said the most “impactful” ways to offset the risk would be to “rebalance the composition of the economy and support the productivity growth of Irish-owned businesses”.
He also noted that while the report covers the next decade, there are “much longer-term challenges,” including an aging population and climate change, which are expected to impact economic activity in the mid-to-late 2030s.
He described the next 10 years as an “opportunity” for policies to promote the “fundamental elements that underpin economic activity.”
These include encouraging smaller businesses to invest in research and development, developing the country's skills base and building public infrastructure where there are “large deficits right now in housing, healthcare, transport and other public services”.
