'Unambiguous' that Brexit would be bad for us: Central Bank

A pro-Brexit campaigner in London this week

Central Bank chief economist Gabriel Fagan

A pro-Brexit campaigner in London this week

Central Bank chief economist Gabriel Fagan

A pro-Brexit campaigner in London this week

Donal O'Donovan Twitter Email

April 02 2016 02:30 AM

GROWTH in the Irish economy will continue at a robust rate into 2017, the Central Bank has forecast, but risks including a UK exit from the European Union could scupper projections.

If Britain does vote to go-it-alone in June it will damage the economy here, the Central Bank thinks.

"It's unambiguous. The effect would be negative on the Irish economy," chief economist Gabriel Fagan said yesterday.

The real growth rate in the Irish economy is around half the 7.8pc level of gross domestic product (GDP) quoted in official statistics, according to the Central Bank's Quarterly Bulletin.

That assessment confirms the view of many economists who say Ireland's officially world-beating growth statistics are massively exaggerated.

The Central Bank revised up its forecast for GDP growth this year to 5.1pc, but adjusted expectations for 2017 down slightly.

Stripping out factors such as buying and selling of aeroplanes by firms based here, the true pace of growth was 4pc last year, and likely to be the same in 2016, it said.

Growth in the domestic economy will continue at the same pace in 2016, assuming Ireland's relationship with Britain continues unchanged, officials said. Domestic demand not exports is now the main driver of growth, and the jobs recovery is probably the most significant driver of that, according to the report.

With debt still high and true growth lower than the headline GDP figures suggest the bank said an incoming government will need to adhere to European budget rules and ensure progress towards a balanced budget by 2018. With wages now rising across much of the economy, and strong demand from any sections for further increases, the Central Bank called for moderation.

The latest overview of the economy points to a generally positive outlook, but that excludes unknown risks, including the potential impact if Britain votes to leave the European Union.

Data from specialist bank Investec yesterday showed that Ireland is so far shrugging off any headwinds already from the so-called Brexit debate in the UK.

Investec's Manufacturing PMI for Ireland showed an uptick in the rate of growth in March, with jobs up on the back of strong new order, including from Britain.

That's despite pressure from a cheaper pound sterling.

Headline PMI tracks growth on a scale either side of 50, where 51 shows an increase and 49 a decline.

It registered at 54.9, an eight-month high, in March.

Job creation accelerated for the third month in a row to the fastest since July 2015.

Investec's Philip O'Sullivan said the results mean that so far at least, Ireland is weathering the Brexit risk storm.

"Our mantra for some time has been that 'Ireland will not be immune to any slowdown in international trade'.

"However, with the sequence of growth in the Quantity of Purchases index now extending to 26 months and firms continuing to recruit staff, it is clear that Irish manufacturers are confident that they can safely navigate through choppier waters," he said.