MINISTER FOR FINANCE Paschal Donohoe has said that the Irish economy would get a sharp shock from a no-deal Brexit, with the economy to substantially slow down and unemployment to rise.
At a press conference this afternoon, the minister told reporters that it was a challenge for his department to forecast the effects of a “disorderly” Brexit given it would be an “unprecedented event in recent economic history”.
With another night of uncertainty ahead in Westminster about what form Brexit will take, Donohoe said Ireland would be affected whatever happens but a no-deal would have the most negative effects.
Under a no-deal Brexit, trade between Ireland and the UK would revert to WTO-trade rules meaning costly tariffs hitting Irish exporters and food producers heaviest at first.
The UK is currently due to leave the EU on 29 March and if it does so without a deal, Ireland’s GDP growth this year would slow down substantially to 2.7% (compared to the 4.2% estimated in Budget 2019.
The growth in job numbers would also fall sharply, with 15,000 fewer jobs being created by the end of this year. Donohoe and the department chief economist John McCarthy said that those in the agri-food sector were most at risk in the immediate term.
There will still be jobs being created in the economy, but far fewer than there would have been under a more “orderly Brexit”, according to the Department of Finance.
By 2023, there’d be 55,000 fewer jobs under a no-deal Brexit and the economy will be growing at rate 6% lower than it would have if there’d been no Brexit.
Fears have been raised in the UK that there would be food shortages there under a no deal, but Donohoe said today Ireland is as “well placed as we can be” when it comes to availability of food.
The Minister also said he had no plans to change spending commitments made in Budget 2019, but that if the economy takes the hit expected in a no-deal Brexit then spending could be curtailed in Budget 2020.
He said: “The assessment by my Department shows that a disorderly exit would be particularly severe. The level of economic activity will be around 4.25 percentage points lower than our existing trajectory over the medium-term.
This aggregate figure hides an even larger hit to economic activity in labour-intensive sectors such as agri-food and indigenous small and medium-sized enterprises.
Donohoe added the appropriate measures to take now are to “absorb the shock”, as the economy has the ability to recover after the short-term effects of a no-deal Brexit.
As the path the UK will take becomes clearer, the Minister said the next update on how we’ll be affected by the impacts of Brexit will be published in the Stability Programme, which will be submitted to the European Commission in April.
To embed this post, copy the code below on your site
have your say