The Central Bank of Ireland has identified the changing global tax and trade landscapes and Brexit as potential risks for Ireland's economy.
The Central Bank has published its second Quarterly Bulletin of 2018, which examines recent economic trends and provides the Bank's forecasts for the Irish economy. It revised upwards growth forecasts to 4.8 percent this year and 4.2 percent next year.
However, the bulletin outlined a number of risks to this projected growth. These include uncertainty around the implications of US tax reform, possible changes to the taxation of digital services, and protectionist international trading measures.
On the tax front, the Central Bank said that, for Ireland, "the location decisions of multinational firms are an important driver of overall economic prospects." It explained that the impact of recent US tax reforms on the "geographical distribution of the productive activities" of these firms is not yet clear, because of the complexities of the new tax regime.
The Bank also said that it will be important for Ireland to assess the implications of other international tax changes, including possible reforms to the taxation of digital activities. A related international risk identified by the Bank is "the threat to the international trading system" posed by the adoption of protectionist measures.
Turning to Brexit, the Central Bank said that "if there is a substantial shift in the regime governing UK-EU trade, there will be a costly diversion of resources to logistics and trade-processing systems." Irish consumers and exporters would also be negatively impacted by any increases in transit time and administrative burdens.
Mark Cassidy, the Central Bank's Director of Economics and Statistics, commented: "Domestic demand and positive global economic conditions have seen Ireland absorb the impact of Brexit with relatively little pain to date. However, any obstacles to the way the UK currently trades with the EU is likely to generate a reduction in long-term living standards in Ireland, reduce the range of imported goods available to Irish consumers and make it more difficult for domestic firms to export their goods."