Central Bank warns crash-out to hit harder than predicted for two years
The Central Bank now expects the impact of a no-deal Brexit to be much sharper than most other forecasters in the first two years.
The hit to consumer and business confidence will transmit itself to the economy extremely quickly, it warns.
Its models suggest the economy will grow 4pc slower in 2019 and 2020 than it would have done in the event the UK had stayed in the bloc or left with an agreement - in which case the economy would expand 4.2pc this year and 3.6pc in 2020.
That is much larger than the 2.4pc hit predicted in 2019 by the ESRI, the country's main independent economic research body.
Mark Cassidy, the head of economic research at the Central Bank, said that was due to the extremely rapid transmission of weak business and consumer confidence into the economy.
"When we are talking about the short-term implications, we have much less of a reliance on the economic modelling. There is more reliance first on judgment and looking at the current trends in key indicators," he said at a presentation of the bank's second-quarter economic outlook.
In the event of a hard Brexit, sterling could fall as much as 10pc in addition to the decline of 13pc-plus it has registered since the referendum.
Mr Cassidy said there were particularly large uncertainties around modelling Brexit as it was a unique event.
Estimates of the hit to UK trade with the EU range from 40pc to 60pc, a very big variable.
"We add an extra uncertainty because of the disorderliness of Brexit," he said.
While the financial sector is strong enough to withstand Brexit, there might still be a reduction in lending.
"You may of course see a downturn in credit because of the weaker position of the firms demanding credit, but that is somewhat different from a constraint upon credit from the supply side whereby firms seeking credit at a good credit risk are unable to receive it."