The Department of Finance in Ireland has revised its forecast for Modified Domestic Demand (MDD), predicting a 2.5% expansion, down from previous projections. Minister Paschal Donohoe attributed this downgrade to increased uncertainty, as businesses and consumers adopt cautious spending behaviors. The report considers an alternative scenario where economic activity could be significantly hindered by potential transatlantic tariffs, predicting a lower domestic economic activity by 1.5 percentage points by 2026. Despite these concerns, recent Exchequer returns show a surplus and strong income tax growth, reflecting resilience in the labor market.
"My Department expects MDD to expand by 2.5pc this year, a downward revision of almost half a percentage point from the autumn forecasts. This reflects heightened levels of uncertainty."
"In this alternative scenario, the level of domestic economic activity is around 1½ percentage points below the no-tariff baseline by end-2026."
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