SME Profitability in an Adverse Macroeconomic Environment

Michael Mahony and Tamanna Adhikari
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Michael Mahony: Central Bank of Ireland
Tamanna Adhikari: Central Bank of Ireland

No 8/SI/25, Central Bank Staff Insights from Central Bank of Ireland

Abstract: Irish SMEs are expected to continue posting positive and stable profit margins under the central scenario for the domestic economy. In an adverse scenario which assumes a sharp deterioration in the global and domestic macro-financial environment driven by heightened geoeconomic tensions, SME profit margins fall sharply. Sectors with the greatest trade exposures suffer the largest drop in profitability. While the adverse scenario projects a large increase in the proportion of loss-making SMEs, the number of firms entering financial distress is more modest. This provides confidence in the resilience of Irish SMEs, even under stress conditions.

Date: 2025-11
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