The International Monetary Fund has cautioned that Ireland’s economic resilience cannot be taken for granted, despite the country’s strong performance amid geopolitical tensions and heightened global uncertainty.
“But given Ireland’s structural vulnerabilities in a world that is becoming more unpredictable, this resilience cannot be taken for granted,” the IMF said in its latest assessment of the Irish economy, reports RTE.
“Navigating the fallout from the war in the Middle East calls for agile, calibrated responses that prioritise temporary and targeted measures for the vulnerable, rather than broad-based ones such as tax cuts, subsidies, and price controls,” it added.
The IMF said Ireland needs to prepare its labour market for Artificial Intelligence, noting that the country is “relatively more exposed to AI than many advanced economies because of its concentration of ICT, financial services, and other knowledge-intensive industries.” It added that realising productivity gains from AI would require “continuous reskilling and upskilling as labour demand shifts towards advanced digital and analytical skills,” reports RTE.
The assessment also warned that Ireland’s high reliance on multinational corporations continues to be a source of vulnerability, with “rising geo economic fragmentation and elevated policy uncertainty” potentially leading to shifts in trade and capital flows that could be “detrimental to Ireland’s globally integrated economy.”
It called for broadening of the tax base to provide more sustainable revenue, and suggested increasing local property tax rates, reducing preferential VAT or excise rates on items that disproportionately benefit higher earners, and cutting broad-based personal income tax reliefs, reports RTE.
On spending, the IMF warned that current expenditure had become elevated following rapid growth in recent years, with health and social spending repeatedly exceeding budget allocations, and called for stronger expenditure controls to minimise overruns.
“To ensure timely delivery of infrastructure projects, policy should continue to address key structural bottlenecks to investment, particularly those arising from the complex planning and judicial review process,” the report stated, reports RTE.
On housing, the assessment found that persistent shortages warrant renewed efforts to boost supply, acknowledging progress including a pickup in housing completions but highlighting that achieving new targets would require further planning reforms.
“We recommend removing rent controls to further boost rental supply, while continuing to support vulnerable households,” the IMF said, reports RTE.
According to the IMF’s forecasts, modified domestic demand growth is projected to moderate from almost 5% in 2025 to about 2.5% in 2026-27, with the slowdown largely reflecting weaker private consumption and normalisation of investment.
“With the economy in a relatively strong position, this is the time to make sound choices that address vulnerabilities, improve productivity, and secure lasting prosperity,” it concluded, reports RTE.
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