Andrew Webb on Ireland’s latest Financial Stability Review

Andrew Webb analyses Ireland’s Financial Stability Review, highlighting economic resilience, rising risks, and the need for forward-looking policy action.

The Central Bank’s latest Financial Stability Review (FSR) is clear that Ireland’s financial system remains fundamentally sound. Unsurprisingly, the more complex risk landscape is recognised in the FSR. Market sentiment is fragile and the welcome move away from the inflationary pain of the last few years has been replaced by fears over geopolitical shocks, supply-side strains and rising trade tensions.

On the face of it, Ireland continues to perform well. The domestic economy is growing, households and SMEs are in relatively strong financial health, and the banking sector remains profitable and well capitalised.

But structural cracks are more visible. The commercial property market continues to experience price corrections and challenges in filling space. Housing supply continues to lag far behind demand. And the economy is still heavily reliant on volatile corporation tax receipts and a concentrated base of multinationals.

"Ireland’s economy is resilient, but structural pressures are mounting. This is the time for clear-eyed, forward-looking policy that protects our resilience."

The Review rightly points to growing risks around trade and tariffs, particularly as global trade becomes more politicised and fragmented. Ireland’s export model, anchored in pharma, tech and agri-food, is highly vulnerable to supply chain disruptions, diverging regulations and retaliatory trade measures.

Ireland’s economic position is relatively strong, but it is also narrow. Public finances are flattered by corporation tax receipts that are concentrated and highly exposed to external shocks. The labour market is near capacity, and investment bottlenecks in housing and infrastructure are holding back sustainable growth.

While there’s no immediate sense of crisis, this is the time to act with clarity. Policy must keep pace with a shifting risk environment, from housing and infrastructure pressures to trade fragmentation and geopolitical turbulence. The resilience our economy has demonstrated, shock after shock, is not a given. It depends on policy that is not just reactive, but supportive and forward-looking.