Growth, which was artificially swollen in 2015, because of the repatriation of financial assets by some multinationals and the arrival of an aircraft leasing company (real GDP increase was approximately 4.5% excluding these exceptional factors), continued in the right direction in 2016. Multinational companies domicile their operations in the country to take advantage of the low corporation tax rate (12.5% at the most) but any positive effects of their activities are limited as most of these activities take place outside Ireland. The domestic market however gains momentum and there is some additional job creation. Unemployment has fallen and wages are rising,  which should help drive consumption in 2017, whilst investments are likely to slow unless there are some new initiatives from multinational companies (in particular patent transfers). House building is however expected to continue. The high level of corporate debt and non-performing loans (mortgages, SME loans) still held by banks will continue to impact on credit availability to smaller companies. Stress tests carried out in 2016 by the European Banking Authority also revealed that Irish banks were still overly vulnerable to economic shocks. In terms of foreign trade, the depreciation of the pound sterling, under the Brexit effect, could continue to impact on the Irish home economy, and in particular the agri-business sector, whilst multinationals, whose sales are denominated in other currencies, are relatively immune. Exports should however feel the benefits of a gradual increase in demand in other export markets. There are other medium term challenges. If the United States reduces taxes on business, US multinationals could decide to repatriate some of their business operations and some of their profits to their country of origin. On the other hand, the withdrawal of the United Kingdom from the EU could lead to British companies relocating to Ireland. Inflation is likely to rise in 2017 alongside the gradual rise in energy prices and possible tensions in the job market.

Ireland’s current account returned to surplus in 2013 thanks to a contraction in domestic demand and an improvement in its cost-competitiveness (the unit cost of labour rose slightly in 2016 but remains well below the levels seen prior to 2015). The current account surplus remains substantial. Exports growth rate  slowed in 2016 because of weaker demand for chemical and pharmaceutical products (#1 exports) and a reduction in domiciliation by foreign companies. Slowing demand in the United Kingdom (15% of Irish exports) was however offset by strong growth in exports to China and the United States, and this trend is likely to continue in 2017. The country  ended,  in late 2013, its international rescue plan without having to call on the Precautionary Credit Line. Thanks to economic growth and  budget cuts, public deficit has been significantly reduced and national debt, which had literally ballooned between 2008 and 2012 as a result of the banking sector bailout and the recession, is gradually being reduced. In this context, the government now has increased room for manoeuvre which should enable it to cut taxes on lower income families and restart public investment. The increasing importance of corporation tax for government revenues means that the public accounts are more vulnerable to any changes in the strategies of multinational companies.

The inconclusive result of the February 2016 parliamentary elections delayed the formation of a new government. Parliament finally approved the appointment of Enda Kenny, leader of Fine Gael, as Prime Minister. He has been leading a minority coalition government since May 2016 that includes members of his party and a diverse mix of independent members of parliament. The second biggest party in parliament, Fianna Fail, the long-term rival to Fine Gael, agreed to abstain in parliamentary votes until the end of 2018. Any election ahead of the scheduled elections due to be held in 2021, would probably lead, once again, to a hung parliament.