Ireland’s growth outlook is “more American than European” despite the economy’s exposure to US policy uncertainty, according to ratings agency Standard & Poor’s (S&P).
S&P sovereign credit analyst Samuel Tilleray told a webinar hosted by the firm that strong personal consumption driven by strong population growth combined with a competitive FDI (foreign direct investment) offering and exposure to the US economy made Ireland relatively unique in the euro zone.
It also explained why the Irish economy was growing strongly similar to the US (S&P expects the economy here to grow by 2 per cent plus this year) while much of the euro area was struggling with slow or anaemic growth.
“The flipside of being relatively more US exposed is of course a heightened exposure to US policy uncertainty,” Mr Tilleray said.
While there is no clarity on US president Donald Trump’s tariff plan, he threatened last week to impose a ring of tariffs around the entire US economy, a move that poses a risk to Ireland’s €54 billion export trade with the US.
S&P has an AA-rating on Ireland, three rungs below its top-notch AAA grade, but four levels above where it stood at the height of the financial crisis. It revised Ireland’s outlook to “positive” from “stable” in November on the back of the extraordinary overperformance in corporate tax receipt collections.
While highlighting Ireland’s “extraordinary fiscal overperformance”, which resulted in a €24 billion domestic surplus last year, Mr Tilleray noted the figure was boosted by €14 billion accruing from the Apple tax case which was booked into the accounts for last year.
He also warned that because Ireland’s corporate tax base was so heavily concentrated around a handful of multinationals in the tech and pharma sectors, “the redomiciling of one or two big firms” posed a significant risk to the public purse.
S&P’s central scenario for Ireland was that it would continue to run big fiscal surpluses, and that Ireland’s net debt position, a key measure of fiscal space, would move to a level that is better than most euro zone peers.
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