Ireland lowers domestic growth forecast to 1.5% - 2.1%

The finance ministry of Ireland has adjusted its domestic growth expectations downward, projecting a range of 1.5% to 2.1% for the current year. This revision from the previous 2.3% forecast is primarily attributed to the inflationary impact of the conflict in the Middle East and its subsequent pressure on global energy markets. The ministry’s assessment focuses on Modified Domestic Demand (MDD), which provides a more accurate reflection of the local economy by excluding the distortions of the multinational sector. While MDD saw a robust expansion of 4.9% last year, future growth remains sensitive to price volatility. Under a scenario where Brent Crude Oil prices average $90 per barrel, MDD growth is expected to reach 2%. However, a severe outcome with oil at $130 per barrel could see that figure drop to 1.5%. Inflationary forecasts have also been raised, with the ministry now predicting a rate of 3.3% for the year, though severe scenarios suggest it could peak as high as 6.7% in early 2027. In response to rising fuel costs, the government has allocated 755 million euros toward tax cuts and spending increases to support households and businesses. Despite the broader economic slowdown, the state maintains a favorable budgetary position driven by record corporate tax contributions from multinational corporations. The finance ministry has upgraded its budget surplus forecast to 2.5% of modified gross national income, up from the 1.4% projected in October. Corporate tax revenues are expected to reach 35.3 billion euros this year, with long-term forecasts suggesting a rise to 45.2 billion euros by 2030.