Ireland’s Finance Minister, Paschal Donohoe, stated today that the near-term economic outlook for the country is “clouded in uncertainty.” He cautioned that Ireland must now commit to a new fiscal framework.
Mr. Donohoe is speaking at the National Economic Dialogue 2025, the central theme of which is medium-term budgetary planning against a rapidly evolving global backdrop. He noted that while Ireland’s public finances appear robust on the surface, vulnerabilities stemming from its reliance on corporation tax, and subsequently income tax, are increasingly evident.
“A significant portion of the headline balance originates from a small number of large multinational corporations, and as I’ve mentioned, the overall sentiment is shifting. Planning on the assumption that these receipts will be permanent is inappropriate and could be dangerous,” Mr. Donohoe emphasized.
Mr. Donohoe also stated that the Government is committed to investing the €13 billion received from the Apple EU Court of Justice ruling last year in infrastructure, specifically housing, energy, water, and transport. “We recognize that these revenues are one-off and should not be wasted. They must be used in a transformative way, attracting private capital such as inward investment. This approach will maximize the return to the taxpayer on these funds.”
Last month, the Government released its Annual Progress Report, which revised Modified Domestic Demand forecasts downward to 2.5% for this year and 2.75% for 2026. The report also cautioned that if existing tariffs remain in place, these forecasts could be further reduced by 1.5% each year.
According to Mr. Donohoe, a revised European fiscal framework took effect in April last year, representing a “sea-change” in how budgetary policy is structured, with public spending, net of tax changes, fixed for the duration of a government’s term.
“The goal is to establish fiscal certainty while ensuring fiscal sustainability. This marks a fundamental shift from our past approach to fiscal policy, which is why we’ve made it a central theme of this year’s dialogue. In practical terms, this means the Government must commit to a defined path for net public expenditure over the next five years. Ireland must select an expenditure path that aligns with our economic and fiscal circumstances, and we cannot deviate from it.”
