{"id":523203,"date":"2026-04-10T11:19:16","date_gmt":"2026-04-10T11:19:16","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/523203\/"},"modified":"2026-04-10T11:19:16","modified_gmt":"2026-04-10T11:19:16","slug":"how-vulnerable-is-irelands-economy-to-global-unrest-and-oil-price-shocks-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/523203\/","title":{"rendered":"How vulnerable is Ireland\u2019s economy to global unrest and oil-price shocks? \u2013 The Irish Times"},"content":{"rendered":"

The quarterly press conferences in the Department of Finance<\/a> have seen ministers reflect upon some grim moments over the past decade. They have furrowed their brows in anticipation of the potential economic fallout posed by Brexit<\/a>, Trump<\/a>, corporation tax reform, Covid, Ukraine<\/a>, Trump again and now war<\/a> in the Middle East.<\/p>\n

Yet, despite all these potentially harrowing moments for the Irish public finances over the years, the money has kept rolling in and the show has remained on the road. Apart from a brief blip in corporation tax receipts in the late summer months of 2023, the Government has rarely had to worry about the content of the actual exchequer returns themselves. <\/p>\n

On Tuesday, the geopolitical situation had again darkened considerably as Donald Trump\u2019s deadline in the Gulf loomed over everything. <\/p>\n

Speaking at the publication of the latest returns, Minister for Finance Simon Harris described it as a \u201cgrave moment\u201d for the world. Hours later, the US president would agree to a temporary ceasefire \u2013 and the price of oil would plunge. Stock markets soared, borrowing costs eased.<\/p>\n

Despite the world being roiled by Trump and Iran, the exchequer receipts for the first quarter look remarkably resilient. Overall tax revenues in the first three months were 3.4 per cent higher than in the first quarter of last year. Income tax returns increased by more than 6 per cent and VAT by over 5 per cent. <\/p>\n

It would seem the economy has weathered the trade tensions and new tariffs of Trump 2.0 without significant damage.<\/p>\n

On the corporation tax side, the department described a 3.1 per cent decline as being \u201cdown slightly\u201d \u2013 but there was no sign of panic about what is a seasonally variable tax heading. <\/p>\n

The upshot of it all: when Apple\u2019s one-off tax payments are excluded, the State has collected \u20ac700 million more so far this year than it did in 2025.<\/p>\n

\u201cIt is very early in the day, but income tax and VAT say the economy is doing fine,\u201d says Conall Mac Coille, group chief economist at Bank of Ireland. <\/p>\n

He, like others, keeps a close eye on corporation tax returns. The dip, when compared to last year, can\u2019t be viewed as significant \u2013 \u201cas the key months haven\u2019t happened yet\u201d.<\/p>\n

Those positive headings can\u2019t be viewed in isolation, says economist Austin Hughes: \u201cThe first three months don\u2019t usually tell you a lot about what is happening in the economy but they were bound to be stronger than last year.\u201d <\/p>\n

Hughes says this is due to the fact that the Government made no concessions on income tax in the budget. In fact, many workers were made worse off on the tax side as indexation against rising wages did not take place.<\/p>\n

At the same time, he says, overall inflation will have played a part in the boosted VAT returns, as goods and services are, in general, more expensive than they were at the same stage in 2025. <\/p>\n

Hughes believes that trying to discern a direction of travel in the economy is made more difficult these days by two factors: the volatility of the overall economic situation, and \u201cthe inherent volatility of the public finances themselves\u201d.<\/p>\n

As proof of this he points out how the final Government surplus for 2025 of \u20ac11.6 billion ended up being several billion euro in excess of what was anticipated by the likes of the Central Bank and the ESRI.<\/p>\n

\u201cThey are deep and dark pools, the public finances,\u201d he says.<\/p>\n

Despite the opacity of the exchequer position, Hughes views the general situation as \u201cquite healthy\u201d. <\/p>\n

He contrasts the State\u2019s general budgetary standing favourably with that of several European economies and that of the United States. A number of developed economies are facing sizeable deficits and are having to borrow heavily to plug the gaps.<\/p>\n

\u201cLook at the French,\u201d he says. \u201cThey are struggling to get to a 6 per cent deficit this year. The Belgians too. And the Americans are in an extraordinary position.\u201d<\/p>\n

He refers to figures showing that more than a quarter of US federal revenues are eaten up by interest costs alone. \u201cThe Irish number is 2 per cent. It gives you a sense of a healthier position.\u201d<\/p>\n

Neither is he particularly bothered by the short-term prospects for corporation tax receipts. <\/p>\n

\u201cAlthough the corporation tax flow is going to be volatile, it is potentially volatile in both directions. There is a two-sided risk. Risks in the short term are probably to the upside more than the downside\u201d.<\/p>\n

The growth in tax revenues has enabled the Government to substantially expand the spending side of the ledger in the past few years.<\/p>\n

As noted by the Irish Fiscal Advisory Council (Ifac), gross voted current spending increased by 6.2 per cent in the first quarter but this was in line with what had been budgeted for. The watchdog noted that health spending was running at 7.2 per cent \u2013 well above a budgeted forecast of 4.8 per cent. This is hardly unusual and health has accounted for the vast bulk of additional spending over the years. <\/p>\n

However, this was counterbalanced in the first quarter by other departments being well behind on their forecasted spending growth. For example, Education, Children and Justice had growth of just 2.6 per cent \u2013 compared to the 6.8 per cent that had been expected on budget day.<\/p>\n

Spending overruns have been the bane of Ifac\u2019s existence. <\/p>\n

Its chairman, Seamus Coffey, has repeatedly said that while budgets might appear balanced when published, the assumptions upon which they are based can quickly become redundant as individual departments are bailed out with extra money the following year. <\/p>\n

The public finances are in a really good place, we have an extraordinary opportunity that we must make sure we don\u2019t blow<\/p>\n

\u2014 \u00a0Austin Hughes<\/p>\n

These overruns can easily become baked in and end up creating new baselines year after year. Coffey says it is very early in the year to get a sense of what might happen in 2026 but there are positive signs at least.<\/p>\n

\u201cIt is hard to know as it is our first time seeing them [the spending figures], we don\u2019t have profiles for the rest of the year,\u201d he says.<\/p>\n

\u201cGrowth in gross voted current spending is running at over 6 per cent, so spending is growing faster than revenue but that is in line with the annual totals set out in the budget. It would be a positive if they were to stay close to the budgeted amount \u2013 we haven\u2019t seen that in recent years. Very significant supplementary estimates have been passed by the D\u00e1il … \u20ac4 billion was put through last year \u2013 far, far higher than that set out in the budget.\u201d<\/p>\n

For Mac Coille, given that the budget allowed for overall spending growth this year of 7.5 per cent, the real question is whether such planning was prudent or not. <\/p>\n

\u201cWhether you are above or below that it is a little bit moot; it is very strong spending growth whatever way you look at it.\u201d <\/p>\n

He notes that many big voices have expressed their concerns, such as the Central Bank and the ESRI.<\/p>\n

For Hughes, however, this should not be a big worry, and extra spending needs to happen.<\/p>\n

\u201cI don\u2019t think we have budget constraints the way Ifac would be saying. Proper budgetary spending will address that,\u201d he says.<\/p>\n

[\u00a0Believe it or not, few EU countries are offering more relief on energy costs than IrelandOpens in new window<\/a>\u00a0]<\/p>\n

There is money there that can be spent, he says, \u201cbut it has to be spent with purpose\u201d. <\/p>\n

\u201cThe public finances are in a really good place, we have an extraordinary opportunity that we must make sure we don\u2019t blow.\u201d<\/p>\n

Hughes argues that, what he calls \u201csocial infrastructure\u201d needs to be upgraded to \u201ckeep society relatively sweet\u201d. <\/p>\n

\u201cYou need to be able to show we are making progress on housing, progress on health. We need to show more ambition in those areas.\u201d<\/p>\n

If this doesn\u2019t happen, he warns, \u201cfractures in the economic and social fabric\u201d could emerge. He says when this has happened elsewhere \u2013 such as in France \u2013 it has made running the public purse \u201cpractically impossible\u201d.<\/p>\n

While Coffey and others will be keeping a watching brief on current spending, the Ifac chairman says Tuesday\u2019s figures were a positive marker on the overall state of the Republic\u2019s economy.<\/p>\n

Like Hughes, he says the impact of inflation will have fed into the income tax and VAT numbers \u2013 but both \u201cpoint to some strength in earnings and spending\u201d.<\/p>\n

The trajectory for the rest of the year hinges in no small part on the path taken by the warring parties in the Middle East.<\/p>\n

The outworking of discussions between the US and Iran over the next fortnight will go a long way in determining the extent to which oil and energy prices impact on inflation. <\/p>\n

Iran is seeking to toll tankers passing through the Strait of Hormuz in order to rebuild its smashed economy and infrastructure. This could conceivably keep the price of oil significantly higher than it was pre-war. And there is the prospect that hostilities could resume and the Strait will effectively be closed to western shipping. <\/p>\n

Despite the large relief rally that swept through stocks and bond markets on Tuesday night, the price of oil nudged up again on Thursday as tensions continued, and Israel continued its war in Lebanon. <\/p>\n

At the end of February, a barrel of Brent Crude was trading at $70 on the futures market. After the ceasefire announcement and apparent efforts to draw a line under the conflict, it has settled at close to $100. <\/p>\n

Likewise, gas prices remain high and gas futures are still some distance from the sort of lows seen at the start of the year.<\/p>\n

Traders are still assessing whether oil and gas tankers will be able to safely exit the Strait of Hormuz in the sort of numbers they were previously accustomed to, and the extent of the damage wrought on energy infrastructure in the likes of Saudi Arabia, Qatar, Kuwait and the United Arab Emirates. <\/p>\n

But it seems certain that, no matter what now happens politically and militarily in the region, consumer prices in Ireland are going to rise well above what was expected at the start of the year. <\/p>\n

The pressure on the Government to spend some more of its tax surplus is unlikely to abate while petrol, diesel and home heating prices remain elevated. The fuel protests that have snarled up so much of the road network this week \u2013 and blocked access to oil facilities \u2013 are evidence of a fraught climate.<\/p>\n

[\u00a0Recent fuel price increases \u2018not in breach of any law\u2019, consumer watchdog findsOpens in new window<\/a>\u00a0]<\/p>\n

Based on these latest exchequer returns, how much leeway has the Government got to deal with an ongoing shock?<\/p>\n

\u201cIt depends,\u201d says Coffey. \u201cThe situation is highly volatile and reductions in the oil price today could be reversed very quickly. <\/p>\n

\u201cWhen it comes to the energy price shock, the Government cannot protect the whole country from the rise in prices. Whatever a barrel of oil costs, that is what we have to pay. <\/p>\n

\u201cBut it can look at the distribution of that increase. What you would like to see happen are targeted measures \u2013 to those that need it most \u2013 not blanket measures like we have seen with reductions in excise, which benefit everybody.\u201d<\/p>\n

For Hughes, the focus should remain on dealing with the longer-term threats to the economy.<\/p>\n

\u201cA huge infrastructure spend is needed over the next couple of years that will whittle away those surpluses. I would be happier than some other economists to see them whittled away,\u201d he says.<\/p>\n

\u201cOur problems with infrastructure \u2013 even if we include Mr Trump \u2013 is probably the main area where things could go badly astray. We are relatively resilient to international matters.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The quarterly press conferences in the Department of Finance have seen ministers reflect upon some grim moments over…\n","protected":false},"author":2,"featured_media":523204,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[23206,84,181819,1294,181461,107121,181818,42257,56,54,55],"class_list":{"0":"post-523203","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-bank-of-ireland","9":"tag-business","10":"tag-conall-mac-coille","11":"tag-economy","12":"tag-fuel-protests","13":"tag-irish-fiscal-advisory-council","14":"tag-seamus-coffey","15":"tag-simon-harris","16":"tag-uk","17":"tag-united-kingdom","18":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/523203","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=523203"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/523203\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/523204"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=523203"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=523203"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=523203"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}