In an annual report it is due to file to the European Commission, the Department of Finance downgrades its expectations for Modified Domestic Demand (MDD), regarded as the most reliable measure of economic activity in Ireland.
Paschal Donohoe, the Minister for Finance, said: “My Department expects MDD to expand by 2.5pc this year, a downward revision of almost half a percentage point from the autumn forecasts. This reflects heightened levels of uncertainty.
“Even in the absence of any further changes in tariffs, there is evidence that firms and households are adopting a ‘wait-and-see’ approach. In other words, they are holding off on big-ticket purchases; this is also a feature in other economies.”
These forecasts were produced at the end of March on the assumption that transatlantic tariffs would not be introduced.
“We have included an alternative scenario which assesses the potential impacts for the Irish economy under the current tariff landscape,” Mr Donohoe said. “In this alternative scenario, the level of domestic economic activity is around 1.5 percentage points below the no-tariff baseline by end-2026.”
The current scenario is a 10pc tariff on Irish exports to America, with exemptions for some sectors, including pharma. If that remains, the projection is that MDD will grow by 2.5pc this year and by 1.75pc next year.
The Exchequer returns published today show a surplus of €2.8bn to the end of April. Overall spending was €33.1bn, in line with the amount profiled by departments, but an increase of almost 10pc on this time last year.
Olivia Lynch, Head of Tax Markets at KPMG, said: “Income tax was the top performer in April with receipts of €3.5bn, up 7.5pc compared to April 2024. This growth is reflective of a buoyant Irish labour market operating at full employment.
“Cumulative tax receipts for the year to date are 8.3pc ahead, demonstrating continued strength and resilience in the economy. April typically sees lower activity in Corporation Tax receipts. All eyes will be on May which is a better gauge of economic activity as it is one of the key months for corporation tax payments.
“The coming months will be crucial to see whether Irish tax yields remain stable amidst the global economic uncertainty.”
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