Message from the Editor: Ireland's silent slowdown

Irish Times

18-05-2025

The economic storm clouds that have been gathering since the start of this year show no signs of going away soon. It is not that the economy itself is losing momentum. Figures for the first part of the year show all the traditional indicators remain quite positive. Inflation is at 2 per cent. Employment and tax receipts remain on target.
But far from abating, the notes of caution or even pessimism emanating from the Departments of Finance and Public Expenditure have risen slightly. It is not hard to see why. The actual effects of
Donald Trump's
wildly erratic announcements on trade and tariffs remain to be seen, but most economists still predict that their overall impact will be recessionary for the US economy, with a knock-on effect for trading partners like Ireland. More specifically, the threat to the pharmaceutical sector which supports so many well-paid Irish jobs and provides such a large part of the country's corporate tax revenues has not gone away. In fact, pharma exports in the first part of 2025 have been boosted by companies shipping more product earlier to avoid potential levies.
And while in Ireland those traditional economic indicators remain stable, there is, as Cliff Taylor points out in
this illuminating piece
, growing anecdotal evidence that the uncertainty is taking a toll. Big capital investment projects are being put on hold. Some pharma companies have imposed hiring freezes. We have seen lay-offs in tech and the market for mergers and acquisitions has stalled. There are signs of caution at the top of the property market. 'The Irish economy is experiencing a silent slowdown, driven mainly by a fall-off in capital investment by businesses,' Cliff writes.
The knock-on effect for the rest of the year is unknown, as is the answer to the question of what happens when the current 90-day tariff interregnum announced last month by Trump comes to an end this summer. Regardless of what happens, most economists calculate that the uncertainty already caused by these developments will make businesses more risk-averse and act as a drag on growth.
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As Government Ministers see it, then, the challenge at the moment is to continue to chart the course they already laid out but to keep firmer control on the big spending departments and dampen public expectations of any more of the one-off financial supports that became a feature of the last government. Any further payments, if they happen at all, will be targeted at those most in need, the Taoiseach signalled to the Dáil this week.
With cost-of-living pressures still bearing down on many middle and low-income families, that may prove a difficult line to hold, and a profitable point of attack for the Opposition. But the really difficult decisions will not be faced until the end of the summer, when pre-budget discussions get seriously under way. And in this year of international turbulence, nobody knows what state the world might be in by then.
Ruadhán Mac Cormaic
Editor
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