Disorderly Brexit would hit Irish growth, jobs and public finances
Ireland’s economy, the best performing in Europe since 2014, could see GDP growth drop if a clean Brexit isn’t on the cards
Dublin — Growth in Ireland’s GDP could be 4.25 percentage points less than forecast by 2023 under a disorderly Brexit and swing state finances back into a modest deficit from this year, its finance department forecast on Tuesday.
Ireland’s economy has been the best performing in Europe since 2014, but with close trading links with Britain, its export-focused economy is considered the most vulnerable among remaining EU members to the impact of its neighbour’s departure from the bloc.
The assessment follows a similar warning from Ireland’s central bank on Friday that a no-deal Brexit could knock as much as four percentage points off the economy’s growth rate in its first full year and up to six percentage points over a decade.
“It is important to recognise that such estimates may not capture the full impact, and the figures may be conservative,“ finance minister Paschal Donohoe said in a statement, citing the unprecedented nature of a sudden departure on March 29.
Ireland’s economy would continue to grow, Donohoe said, but GDP growth would slow to 2.7% this year and about 1% next year compared to the 4.2% and 3.6% currently forecast.
Such an outcome would mean employment would increase more slowly than forecast and push the unemployment rate two percentage points higher than it would otherwise have been over the next five years.
Ireland’s agri-food sector and indigenous small- and medium-sized enterprises (SMEs) that trade with the UK would likely be disproportionately hit, Donohoe said.
The public finances would also deteriorate and after posting the first budget surplus in a decade last year, the exchequer would return to a deficit of 0.2% of GDP this year and 0.5% next year.
Said Donohoe, “In the short-term, the appropriate fiscal strategy would be to allow the public finances to absorb the shock — the in-built automatic stabilisers will provide the first line of defence for our economy, allowing a deficit to occur.“