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Failure by EU to ink post-Brexit trade deal 'could hit Irish economy'

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Photo: PA

Photo: PA

PA Wire/PA Images

Photo: PA

A failure by the European Union and the UK to ink a post-Brexit trade deal as well as changes to the global taxation environment are two of the potential challenges that could hit Ireland's economy, according to a report published by ratings agency Moody's last night.

But the agency has affirmed Ireland’s A2 rating and maintained the stable outlook on the rating.

It also said a no-trade deal outcome between the UK and EU is unlikely.

"Although not likely, a no-trade deal Brexit at the end of the transition period this year is the largest single risk to Ireland's economic outlook, given strong trade and supply chain links," noted the report prepared by Sarah Carlson, a Moody’s senior vice president and lead sovereign analyst for Ireland.

"The UK is a main destination for Irish exports, accounting for 11pc of total goods exports in 2018, albeit slightly down from 14pc in 2015," it pointed out.

"Supply chains are deeply integrated and would therefore face heavy disruption under a no-deal scenario at the end of the transition period which is scheduled for the end of this year," it added.

Moody's said that the main reasons it has reaffirmed Ireland's rating include the country's "high wealth levels and rapid growth".

It warns that while Ireland has returned to a fiscal surplus, debt levels remain high relative to peers and that "revenue concentration risks persist".

The agency said that while the Irish banking risk has "largely receded... it continues to deive susceptibility to event risk together with political risk and external vulnerability risk".

Moody's also noted that Ireland's growth has been propelled by multinationals.

"Although the large presence of multinational corporations in Ireland reflects the country's high competitiveness, it has also translated into elevated volatility," the agency noted.

"Over the past five years, growth rates have been inflated by the large presence of multinational corporations in the country," the report said.

The ratings agency also warned that changes in global taxation rules would undermine Ireland's attractiveness for multinational corporations.

"Ongoing discussions at the OECD levels to harmonise taxation rules are a key risk," according to the agency.

Moody's said that while any negative outcome in relation to tax changes would be unlikely to impact existing multinational investment in Ireland, new levels of foreign direct investment into the country could "materially decline" in such a scenario.


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