Ireland

Ireland is a regular Eurozone outperformer (+5.7% growth over the past 30 years and +6.4% over the past 10 years). In 2020, Ireland was among the very few countries spared by the recession, thanks to the resilience of its multinational-dominated export sector (notably in the technology, pharmaceutical and chemical sectors). The Irish economy grew by +5.9% in 2020, +13.4% in 2021 and we expect GDP growth to come at +9% in 2022 and +5% in 2023, slowing due to declining profits of the multinational sector and elevated inflation.

The policy response in 2020 was strong and, in 2021, EUR17bn, equivalent to 5% of GDP, was allocated for the economic recovery in sectors sensitive to Covid-19 restrictions, while non-Covid government spending increased by EUR5bn in 2022. However, the low interest expenditures (down to 4.3% of government revenues from above 5%) and the robust tax receipts have kept the increase in public debt under control (+2.2pp to 61.3% of GDP). In 2022, a reduction in the debt ratio is not expected, but a further increase will most likely be avoided. The private sector has benefited from the economic resilience and state support as non-financial corporations were among the few to register an increase in margins during the sanitary crisis.

Ireland's low tax environment has helped attract significant foreign investment. In 2022, it introduced changes in the international corporate tax framework, including the reallocation of multinational companies’ profits across different states and an increase in tax rate for very large companies from 12.5% to 15%. This has uncertain consequences for further FDI growth and might affect corporate tax revenues starting from 2023. The external account is strong: the current account surplus should reach 10% in 2022 and stay close to 8% in 2023. The Brexit impact should remain limited in the medium run, even though it affects Ireland more than other EU countries, especially given the complexities of the Northern Ireland protocol.

The Irish business environment proves to be very strong: the country scores very well in regulatory quality, rule of law and control of corruption. Ireland also has a very well-educated labor force, and enjoys a significant openness to foreign trade and FDI. In particular, starting a business, protecting minority investors, paying taxes and resolving insolvencies are ranked at the top among other OECD high-income countries. The minimum global corporate tax reform is, however, expected to have a limited negative impact after 2023.

The 2020 general elections resulted in a three-party governing coalition (Fianna Fail – center-right, Fine Gael  – center-right and the Green Party – center-left) and in the most fragmented parliament in recent history. The left-wing Sinn Fein won the most votes and the second-highest number of seats, hence breaking the 70-year period of electoral dominance by the two central rival parties. The risk of snap elections before the end of the five-year term remains high. Next elections are planned for February 2025.