A 'hard' Brexit will wipe €12bn off our economy, experts warn
Published 07/11/2016 | 02:30
The Brexit could reduce the paper value of the Irish economy by about €12bn after five years, a study has warned.
The joint paper by the Department of Finance and ESRI calculates a so-called hard Brexit would leave Irish economic output around 3.5pc below what it otherwise would have been.
Even under a soft exit, in which the UK retains access to the single market and allows free movement of people, Irish GDP would be about 2.3pc lower after five years.
The unemployment rate, after a decade, could be up to 1.9 percentage points higher under a hard exit, while a percentage point would be lumped on to the deficit.
Neither scenario takes into account any measures the Government may take to mitigate the fallout.
The paper was prepared by economists to shed light on how the departure of the UK from the EU would affect Ireland's economy in terms of growth, unemployment and public finances.
"The simulation results suggest that the potential long-term impact of Brexit on Ireland is severe," the report stated.
The paper also stated that numbers in work would fall by 2pc under a hard exit, and average wages would go down by 3.6pc. The debt to GDP ratio would increase by 11 percentage points.
The study looked at three potential Brexit scenarios, and their impact on the Irish economy on the years after Britain leaves the EU.
The first case, a so-called soft exit, would leave the economy five years after the exit around 2.3pc smaller than it would be if no Brexit had occurred. A hard Brexit would put the Irish economy around 3.5pc smaller.
In both cases, it is assumed that the Government takes no action to mitigate the fallout.
In the Budget, the Finance Department projected the economy would be worth, on paper, €330.8bn by 2021 in nominal terms, inflated in part by the 26.3pc surge in GDP experienced last year as a result of the accounting activities of some multinationals here.
If we stick with the timeline that Article 50 will be triggered by the end of March (disregarding the recent court verdict and speculation of a delay), the UK could be out of the EU by 2019.
Assuming the Irish economy would have been due to grow by 2pc to 3pc on average in the years between 2022 and 2024, the economy could be worth, on paper, €350bn to €360bn roughly, by 2024, five years after the 2019 exit.
A 3.5pc reduction to that equates to about €12bn.
The Irish economy could also potentially take a slightly bigger hit than the UK's under a hard Brexit, according to one of the forecasts in the study.
One forecast in the paper states that the UK economy would fall by 3.2pc over 10 years. Using that same methodology, the Irish economy would be 3.8pc smaller.