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Donald Trump plan to cut business taxes may hit Republic of Ireland hard

By Sean Duffy

Incoming US President Donald Trump's plan to slash corporation taxes could wipe out any possible boost for Ireland that would result from higher growth forecasters say will result from his spending increases.

Analysis from stockbroker Merrion Capital said that global growth was expected to pick up over the coming months, in part thanks to Trump's spending plans.

However, in its latest quarterly bulletin the firm thinks any gains for Ireland could be lost as a result of US tax changes.

"The possibility of lower US corporate tax rates and talk of trade tariffs being imposed by the Trump administration could potentially outweigh any positives for Ireland," it said.

The potential impact on the Republic of Brexit is unknown and unknowable, analysts at Merrion said.

They do, however, highlight a threat to indigenous Irish companies in the report, which notes that 30% of Irish firms depend on the UK market for jobs.

It says that businesses in the agri-foods sector are likely to be particularly vulnerable to the introduction of tariffs or barriers to trade. Merrion estimates that economic growth in Ireland last year was between 4% and 4.5%, with the firm forecasting a drop below 4% this year.

Irish consumers kept spending in 2016, the report said, albeit the level of increases slowed to between 2.7% and 3%.

The firm said that it expected unemployment in the Republic to continue its downward trajectory over the course of the year, with the rate of joblessness forecasted to fall to 7.4%.

It said it expected 35,000 extra jobs to be created in the economy in 2017.

The Republic's housing crisis - particularly in Dublin - is likely to mean that property prices continue to go up, with rises of between 6%-9% expected across the country as a whole.

The report also notes that wage inflation is likely to prove a burden for policymakers in the year ahead, with increased pay demands in the public sector likely to continue.

And Merrion Capital adds that unrealistic pay demands are "the last thing" the economy needs given external uncertainties.

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