31 Jul 2019 | 09.12 am
Central Bank Counts Cost Of No-Deal Brexit
Disorderly Brexit could cost Ireland 100,000 jobs
31 Jul 2019 | 09.12 am
A no-deal Brexit could cost Ireland up to 100,000 jobs and trigger a dramatic slump in economic growth, the Central Bank has warned.
The assessment came as the Central Bank published its third quarterly bulletin of 2019. Mark Cassidy (pictured), director of economics and statistics at the Central Bank, predicted that a no-deal Brexit would cause a significant weakening of activity across many parts of the economy.
“Our current projection is that in the event of a no-deal Brexit, the economy would expand by 0.7% in 2020, as opposed to 4.1% if a deal can be agreed. And our forecast is for around 34,000 fewer jobs by end 2020, and over 100,000 fewer jobs over the medium term, compared to our forecast if a deal on Brexit can be reached,” said Cassidy.
Cassidy added that even if a no-deal Brexit is avoided, there is still a risk of the Irish economy overheating, given that output is now at or close to full capacity.
“If a disorderly Brexit were to occur, there would be a material deterioration in the public finances and the fiscal environment would be significantly more challenging.
“However, it is important that any fiscal response is consistent with long-run debt sustainability and does not undo the hard work in re-establishing Ireland’s fiscal credibility, and risk the emergence of unsustainable debt dynamics.”
The bank’s latest bulletin estimates Irish economic growth of 4.9% this year, moderating to 4.1% in 2020. It also projects a decline in the unemployment rate from 4.7% in 2019 to 4.5% in 2020.
Inflation is projected to pick up moderately, the bulletin notes, citing figures of 1% for 2019 and 1.2% for 2020.
The Central Bank’s central forecast is that growth in 2019 and 2020 is expected to come primarily from the continued expansion in underlying domestic demand, reflected in solid growth in consumer spending and underlying investment.
The forecasts are based on a deal on Brexit being reached and a transition period coming into effect until end 2020.
The bulletin recommends that it would be more prudent for the government to save rather than “spend windfalls”, as such fiscal prudence would help to build buffers in the event of a future downturn.