DUBLIN: The UK’s exit from the European Union will have a “severe” impact on the Irish economy, according to modeling published by the Irish Finance Department.
The Department undertook the modeling in collaboration with the Economic and Social Research Institute (ESRI). They considered three scenarios for the UK’s post-Brexit relationship with the EU: a Norwegian-type arrangement, with the UK part of the European Economic Area (EEA); a Swiss-style free trade agreement (FTA); and an arrangement whereby the UK and EU interact on the basis of World Trade Organisation (WTO) rules.
“Depending on the scenario considered, the level of Irish output ranges to between 2.3 percent and 3.8 percent below what it would otherwise have been,” the report explained.
The EEA scenario was found to be the least detrimental to Ireland; GDP would be 2.3 percent lower, compared with 2.7 percent under the FTA scenario.
The Department said that, after 10 years of a WTO scenario, the Irish GDP would be “3.8 percent below what it otherwise have been in a no-Brexit scenario,” with the “bulk of the impact occur[ing] in the first five years.” In addition, the unemployment rate would be nearly two percentage points higher.
The Finance Department stressed that the Government remains confident that the economy is resilient and that appropriate fiscal policies are in place to help the country adjust to the economic effects of Brexit. It pointed to Budget 2017 measures including the retention of the nine percent VAT rate for the hospitality sector, the EUR400 (USD442) increase in the earned income tax credit for the self-employed, and a Government “rainy day fund” and new debt-to-GDP ratio target.
“Budget 2017 is just the start, more measures will be implemented as the EU-UK negotiations develop over the two years after Article 50 is invoked. The priority areas for this Government remain unchanged – this is about our citizens, our economy, Northern Ireland, our Common Travel Area, and the future of the EU itself,” the Department said.
