RISING uncertainty as a result of the ongoing trade war between the United States and the EU has led to the Central Bank reducing its forecast for economic growth this year. Revising its earlier, more positive outlook, the bank now says that it expects the domestic economy to grow by 2.7%, 0.5% lower than its last projection.
A dramatic fall in residential construction last year also led the bank to project fewer homes than it had predicted being built over the next two years. It now says that there will be 35,000 houses and apartments built in 2025, rising to 40,000 in 2026 and 44,000 in 2027.
The bank said that 70,000 new homes needed to be built every year over the next ten years if the Irish state is to deal successfully with housing shortfall and population growth. In 2024, less than half that number was fulfilled, with just over 30,000 houses and apartments completed during the course of the year.
The Central Bank’s latest economic bulletin said: “Several factors are restraining housing supply including low productivity in the construction sector, delays in utility connection, delays in planning system and a shortage of zoned and serviced land in high-demand areas.
“Risks to the growth outlook remain firmly on the downside as the risk of more pronounced global tensions have risen.
“As a small open economy with extensive trade and foreign direct investment linkages with the US, the Irish economy, public finances and labour market are highly exposed to changes in US economic policy and any broader deterioration in the global trading environment.”
The Central Bank also pointed out that €15 billion of corporation tax receipts were ‘at risk’ of default from multinationals due to tariffs threatened by Donald Trump’s administration in the US. This, it said, could result in ‘fiscal shock’, having wider implications on public finances and potentially leading to changes in current taxation and spending policy by the Government.
Despite the fact that the Central Bank has modified its predictions for economic growth, the level of uncertainty now is less than it was during the two years the country experienced lockdown as a result of Covid-19 or during the Brexit crisis in 2016/17.
See More: Central Bank, Housing Crisis, Trade War
