Trump tax plan could wipe gains from growth
Incoming US president Donald Trump's plan to slash corporation tax in the US could wipe out any possible boost for Ireland that would result from higher global growth, a forecaster says.
Merrion Capital said that global growth is expected to pick up over the coming months, in part thanks to Mr Trump's spending plans. However, in its latest quarterly bulletin the firm thinks any gains for Ireland could be lost as a result of US tax changes.
"The possibility of lower US corporate tax rates and talk of trade tariffs being imposed by the Trump administration could potentially outweigh any positives," it said.
Meanwhile, the potential impact on Ireland of Brexit is unknown and unknowable, analysts at Merrion said.
It does, however, highlight a threat to indigenous Irish firms in the report, which notes that 30pc of Irish firms are dependent on the UK market for jobs.
It says that businesses in the agri-foods sector are likely to be particularly vulnerable to the introduction of tariffs or barriers to trade.
Merrion estimates that economic growth in Ireland last year was between 4pc and 4.5pc, with the firm forecasting a drop below 4pc this year.
Irish consumers kept spending in 2016 the report said, albeit the level of increases slowed to between 2.7pc and 3pc.
The firm said that it expects unemployment to continue its downward trajectory over the course of the year, with the national rate of joblessness forecast to fall to 7.4pc. It said it expected 35,000 jobs to be created in the economy in 2017.
The housing crisis - particularly in Dublin - is likely to mean that property prices continue to go up, with rises of between 6pc and 9pc expected across the country as a whole.
The report also noted that wage inflation is likely to prove a burden for policymakers in the year ahead, with increased pay demands in the public sector likely to continue.
The report says unrealistic pay demands are "the last thing" the economy needs given external uncertainties.