The European Commission's ruling on Apple has mixed implications for the Republic, according to rating agency Fitch, though it has played down the risks to inward investment.

“It could result in a substantial one-off improvement to Ireland’s fiscal position,” the agency said in a statement, “but may also add to medium-term economic uncertainty and increase political risks.”

Last week the commission ruled that Ireland should seek the repayment of €13 billion in back taxes from Apple. Both Ireland and Apple have said they will appeal.

“If upheld, the commission’s ruling would represent a substantial one-off fiscal windfall for Ireland,” according to Fitch. Excluding interest, it said the payment could amount to around 5.1 per cent of 2015 GDP.

“If used to pay down debt and/or reduce borrowing rather than spent, this would accelerate the improvement in public debt dynamics that has been driven by fiscal consolidation and robust nominal growth.”

Government debt

Fitch’s current forecasts are for gross general government debt falling to 63.7 per cent of GDP in 2020, down from 78.7 per cent at the end of 2015. These do not factor in any impact from the Apple ruling but do incorporate the large upward revision to 2015 growth announced in July, according to Fitch .

However, Fitch warns that it is possible any such Apple benefit would be partly offset by increased uncertainty over Ireland’s attraction to global businesses, potentially damaging FDI and employment. However Fitch said it believed this risk was “limited”.

Corporate tax rate

Ireland’s 12.5 per cent corporate tax rate, and its high human development and governance indicators “should keep the business environment attractive to multinationals, and the costs of relocating would be large”, it says. “But the Apple ruling could add to uncertainty created by the UK’s Brexit referendum, which we think will slow export and investment growth.”

Fitch also notes the political debate about whether to appeal the Apple ruling and divisions within the Cabinet.

“This shows the challenge that the Fine Gael-led minority government faces in formulating and enacting policy. It has already been outvoted in parliament on some minor economic issues since its formation in May. A more unstable political backdrop would add to fiscal and economic risks.”