Central Bank governor Gabriel Makhlouf has warned that the current trajectory of government spending will “deplete fiscal buffers” and leave the country exposed to large external shocks.
In his pre-budget letter to Tánaiste and Minister for Finance Simon Harris, Makhlouf said projections have shown expenditure growth outpacing increases in revenue in the coming years.
“If expenditure overruns persist, the underlying budget deficit could rise to €25.7 billion or 5.8 per cent of GNI [Gross National Income] by 2030. This would deplete fiscal buffers, limiting capacity to respond to future negative shocks, while adding to domestic inflationary pressures,” Makhlouf said.
He added that the frequency of large external shocks faced by Ireland has increased and the country must “adjust to this new reality” to ensure the long-term resilience of the economy and public finances.
RM Block
Corporation tax receipts, which now account for 23 per cent of Government revenue compared to just 12 per cent in 2019, were noted as a “key concern” by the governor of the Central Bank.
Makhlouf said the State has become increasingly reliant on these revenues, with 10 companies responsible for 56 per cent of all corporation tax receipts last year.
[ Buoyant tax receipts provide cover for runaway State spendingOpens in new window ]
Last year, the State generated €34.7 billion for the exchequer from corporation taxes. Apple, Eli Lilly and Microsoft are understood to have been the top three largest taxpayers.
Makhlouf added that the information and communication technology and pharmaceuticals sectors combined accounted for more than half of corporation tax revenue in 2025.
“While corporation tax receipts are likely to increase further in 2026, I am concerned about the long-term sustainability of the current high levels of revenue. A broader tax base is needed to help mitigate the risks from a possible loss of corporation tax receipts and to fund known spending pressures.”
How can tech offer solutions for obesity and weight management?
In the correspondence to Harris, Makhlouf also commented on the Government’s previous and upcoming commitments to public investment, which has doubled since 2019.
He said this spending has the potential to have a transformative impact on the country by addressing infrastructure deficits and reducing fossil fuel dependency, which would help Ireland meet emissions targets.
“Achieving value for money is difficult in an economy at full employment and in the face of externally-driven cost shocks, but expenditure discipline, combined with prioritising public projects that yield the largest spillovers to the private sector is key to delivering gains from planned investment.”
[ Targeted supports more critical amid a gradual economic slowdownOpens in new window ]
Last year, a review of the National Development Plan said the state was committed to spending €275 billion on infrastructure projects by 2035, with €100 billion of that amount due to be spent on housing, energy, water and transport projects by 2030.
Makhlouf said the surge in corporation tax revenues have helped provide budgetary surpluses, even after large expenditure increases and tax cuts, that generated funds for big infrastructure positions.
He added “this favourable headline position rests on somewhat unstable foundations” and called on government to focus on development of a broader tax base to mitigate the risks from a possible loss of corporation tax receipts and to fund known spending pressures.
“Ireland’s economic performance presents reasons for optimism but also clear reminders of the need for vigilance.
“We cannot take the progress we have made for granted and need to take a cautious approach to our public finances. Sound policy decisions today can help steer the economy through a turbulent international environment, deliver sustainable economic progress and build the resilience that the country needs.”
