Inflation is stabilising but the risk of Trump pulling US companies from Ireland is threatening the economy, according to the Central Bank's latest quarterly bulletin.

Economist Austin Hughes told Newstalk Breakfast that the future of Ireland’s economy is favourable, but still in a sensitive position.

“There are two elements to the Central Bank Quarterly - one, and it's quite important to say this, they do emphasize that the baseline outlook remains favourable,” he said.

“They have improved their forecasts in terms of economic growth, employment and that, and downgraded their forecast for inflation.

"So, that's encouraging, but as is happening right around the world; they say that downside risks have increased because of geopolitical development.

“At the moment, they're saying the glass is probably a quarter empty because of the uncertainty about Mr. Trump and what may happen in the US.”

Man with many bills or invoices and no money. Shortage, Bankruptcy, doing taxes, barely any money in his wallet, Alamy 2024

Mr Hughes said that Ireland needs to spend more money on infrastructure, rather than saving in rainy day funds.

“Putting money away isn't going to help with infrastructure, particularly if the economy is a little bit softer because of US developments,” he said.

“Then that would be a good time to actually boost spending on infrastructure in the next couple of years – so as I say, it's much more nuanced.

“It is very important to signal the downside risk, but it is very important also to say that just stopping the economy now and saving more money is probably going to hurt more than help over the next two to three years.”

Israel

According to Mr Hughes, Israel’s decision to remove its embassy in Dublin could lead to some financial losses for Ireland.

“Look, I'm not an expert on the geopolitical environment, but I do think there's a consistent signal about what the Irish economy and Ireland stand for, and it's an openness to trade, it's an openness to people, and it's a fairness in terms of how we deal with them,” he said.

“So, in that regard, I think while there may be some concerns around potential losses, it also sends a clear message about what Ireland's about.

“I think it's a consistent message. I think it's a positive message generally, and in that regard, I think there could be offsetting gains in the longer term.”

However, Mr Hughes said it may be a ‘bumpy road’ to these potential gains.

Listen back here: