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Irish central bank warns of big hit to GDP growth if no-deal Brexit

Irish central bank warns of big hit to GDP growth if no-deal Brexit
Offices in the Central Bank of Ireland are seen in the financial district in Dublin, Ireland November 8, 2017. REUTERS/Clodagh Kilcoyne   -   Copyright  CLODAGH KILCOYNE(Reuters)
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DUBLIN (Reuters) – Ireland’s central bank warned on Friday that a no-deal Brexit could knock as much as 4 percentage points off the Irish economy’s growth rate in its first full year and by up to 6 percentage points over a decade.

The “worst-case” Brexit scenario, presented alongside the central bank’s official forecasts for 2019, would see British demand for Irish goods collapse while fresh falls in sterling weigh on the competitiveness of Irish exporters.

Ireland’s economy has been the best performing in Europe since 2014, but in its latest quarterly bulletin the bank published updated analysis on the consequences for the Irish economy should Britain leave the EU on March 29 without a deal.

According to the bank, a “disorderly Brexit” would have “material and immediate economic implications” that its analysis suggests could lower GDP growth in 2019 to around 1.5 percent.

The economy would only escape a bigger hit this year because growth is expected to remain strong in the first three months of the year, before Britain’s scheduled departure.

Over a 10-year period, the bank’s modelling suggests a no-deal Brexit could reduce the overall level of Irish output by around 6 percentage points, although again employment and growth remain positive overall.

“A disorderly ‘no-deal’ Brexit has the potential to significantly alter the path of the Irish economy in both the short- and medium-term, with a substantial and permanent loss of output,” said Mark Cassidy, the central bank’s Director of Economics and Statistics.

The central bank’s official forecasts assume Britain leaves the EU with a deal as scheduled, which would include a transition period to help minimise disruption.

In that case, the central bank’s forecast is for the Irish economy to continue to grow at a relatively strong pace, expanding 4.4 percent this year, then moderating to 3.6 percent in 2020.

Unemployment is forecast to fall to 4.9 percent in 2019 and to 4.7 percent in 2020, down from 16 percent in 2012, when Ireland was midway through a three-year international bailout.

(Reporting by Graham Fahy; Editing by Catherine Evans)

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