National Economic Dialogue 2025 Opening remarks by Minister for Finance, Paschal Donohoe, T.D

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Good morning.
I would first like to thank the Taoiseach and Tánaiste for their opening addresses.
I am delighted to see so many people here today for our annual National Economic Dialogue. It is always such a great opportunity for Government to engage with and to hear from so many different voices and sectors in our society.
I also want to thank Jeromin Zettelmeyer from Bruegel for agreeing to share his thoughts with us today. I think we will all find it really useful to hear his external perspective of global dynamics.
The theme for last year’s Dialogue was “A more shock-prone world: challenges and opportunities for Ireland”. I don’t think any of us realised how prescient a theme it would still be twelve months later.
This year, we are hoping to focus more on medium-term budgeting. The theme is ‘Medium-term budgetary planning against a rapidly changing global backdrop’.
Later this year, Government will submit a new five-year Medium-Term Fiscal and Structural Plan to the European Commission and today affords us an opportunity to hear your thoughts on what we should be focusing on and prioritising.
We have prepared an overview paper to provide the high-level context for discussions today on this theme. It considers what the impact of the rapidly changing global economy will have for us all and what we can do to ensure that we are as best prepared as possible.

Let me begin with the economic backdrop.
As all of you will be well aware, the global trading landscape today looks very different to what we have become accustomed to. A complex interplay between geopolitics and economics is now playing out. This means that after decades of deepening economic integration, we are now navigating a markedly different environment – one shaped by economic fragmentation and heightened geopolitical tensions. This shift has significant economic implications, not just for trade, but for investment flows and long-term economic resilience.
Tariffs are a symptom of this ‘new normal’. Their re-emergence is worrying – taxes on imports lead to higher prices for businesses and consumers and create disincentives for firms considering long-run investments.
More generally, the benefits of trade are being replaced by zero-sum thinking that is detrimental to living standards on all sides.
That is why the Government remains actively engaged in discussions at EU level and with key international partners to put forward an alternative approach that once again supports principles of openness and multilateralism.

Despite these headwinds, I think it is fair to say that our economy has recorded a positive start to the year. The data show that Modified Domestic Demand increased by 0.8 per cent in the first quarter, while the level of employment has now exceeded 2.8 million. To put it another way: of the working age population, three-in-every-four persons is now in work – a figure that has never been higher.
Importantly the period of heightened inflation has passed – prices are now increasing at rates consistent with price stability, though I am conscious that the price level is now higher.
Looking ahead, however, the near-term outlook is clouded in uncertainty. Last month, Government published its Annual Progress Report. A key message from our analysis is that uncertainty is weighing on consumer and business spending and this is likely to continue until there is clarity regarding tariffs. On this basis we have revised down our forecasts for this year and next – MDD is projected to grow by 2½ per cent this year and by 2¾ per cent next year.
However, in light of the uncertain environment, we also included scenario analysis – looking at the impact if existing tariffs were to remain in place. On this basis, growth in MDD would be around 1½ percentage points lower by the end of next year relative to the baseline scenario.

From a fiscal perspective, our public finances are likewise in a strong position on a headline basis. We all know about the vulnerabilities to our public finances from corporation tax, and linked to that income tax, now more so than ever. This revenue stream has allowed us provide billions of supports to households and businesses over the last number of years when faced with the pandemic, elevated energy costs and high inflation.
We face imminent costs in relation to ageing, and the climate and digital transitions. That is why the establishment of the Future Ireland Fund and the Infrastructure, Climate and Nature Fund last year are so critically important. These funds will allow us to help finance our response to these known challenges and ensure that all this excess corporation tax is not used to fund permanent expenditure.
Government has also committed to using the revenue from the proceeds from the Court of Justice of the European Union (CJEU) ruling last year to invest in our stock of infrastructure, particularly in the key areas of housing, energy, water and transport. We know that these revenues are once-off and must not be squandered. They must be deployed in a transformative way – in a way that mobilises private capital such as inward investment. This is how we will maximise the return to the taxpayer on these funds.
Looking at the fiscal parameters, there is much focus on the headline surplus.
But the headline masks considerable vulnerabilities. Much of the headline balance arises from a handful of large multinationals and, as I mentioned, the mood-music is changing. It is not appropriate – indeed it could be dangerous – to plan on the basis of these receipts being permanent.

A revised European fiscal framework came into operation in April last year and this involves a sea-change in the way in which budgetary policy is framed. Public spending, net of tax changes, is fixed over the lifetime of a government.
The objective is to create fiscal certainty while ensuring fiscal sustainability; this is fundamentally different to the way we have conducted fiscal policy in the past and for this reason we have highlighted it as a theme of this years’ Dialogue.
In practical terms, this means Government must commit to a defined path for net public expenditure for the next five years. Ireland must choose an expenditure path suitable to our economic and fiscal conditions, and cannot deviate from it. We will have a short presentation later this morning that provides more information on this new fiscal framework which will hopefully provide more context for our discussions here today.

Before I finish, I want to, against a fundamentally altered backdrop, make the case for optimism.
As a society, we have come through very testing times – from a global pandemic to war on European soil - in the first half of this decade. There are more people employed than ever before and living standards have never been higher.
Of course there are challenges – housing and healthcare to name just two.
But I firmly believe that sensible policies, suitably prioritised and grounded in robust evidence, can help us navigate the turbulent times ahead.
I look forward to the discussion.
Thank you.