Trade tensions becoming a risk for Ireland's small and open economy, Central Bank warns
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As inflationary pressures recede and interest rates come down, other geopolitical risks such as international trade tensions are becoming more of an issue for Ireland’s small and open economy, the Central bank of Ireland has warned.
Governor of the Central Bank Gabriel Makhlouf said a “protectionist and fragmented world” has negative implications for “economic activity domestically and internationally, as well as for the resilience of households, firms and the financial sector”.
Mr Makhlouf was speaking following the publication of the Bank’s latest Financial Stability Review which noted that Ireland’s economy remains resilient with modified domestic demand expected to grow this year and next year at a faster pace than previously expected.
However, it noted that Ireland is particularly exposed to global developments at a time of increased geopolitical and geoeconomic risk.
“Moreover, with an economy performing at or above capacity, expansionary fiscal policy risks aggravating domestic pressures,” Mr Makhlouf said.
The review noted that while global economic growth has been stable — after the inflationary crisis — some indicators of activity have weakened, particularly in Europe.
When asked about the possibility of Donald Trump instituting trade tariffs when he gets back into the White House in January, Mr Makhlouf said the administration is still two months away from taking office and “we do need to wait and see exactly what is going to happen”.
"The effects of tariffs are potentially incredibly complicated, and we're not even going to try and sort of forecast what that might be until we absolutely understand what's going to happen. How long will they be placed for? Will there be any response from other countries?,” he said.