25 January 2019

Financial Times: Ireland central bank warns of ‘immense’ threat of no-deal Brexit

The bank said it foresaw huge damage to Ireland’s economy should political talks fail in coming weeks, adding that immediate turmoil in financial markets would come alongside a drop in consumer spending, disruption in ports and airports, and lower exports.

Ireland’s economic rebound from the 2008 crash has taken the country to the cusp of full employment less than a decade after an international bailout. Now a dispute over the future of the Northern Ireland border has thrown Brexit talks into crisis with just weeks to go before Britain is scheduled to leave the bloc on March 29.

“A disorderly no-deal Brexit has the potential to significantly alter the path of the Irish economy in both the short and medium term, with a substantial and permanent loss of output,” said Mark Cassidy, the central bank’s director of economics.

The bank said Brexit was a situation without historical precedent. It warned of immediate implications if there was no agreement and said the longer-term loss of output would be about 6 per cent.

“In the long run, it is likely that the Irish economy would adjust to the new arrangements but the short-run challenges would be immense,” it said.

Despite these threats, the bank believes no-deal would still not eliminate economic growth in the Irish economy in 2019 and 2020. Employment would remain “positive” despite “materially slower” growth, it said.

Only weeks after Ireland reported its first budget surplus since the crash, the bank said weaker growth would have consequences for public finances.

It said that in the event of no-deal, the Irish economy would grow only 1.5 per cent this year. This compares with its 2019 growth predictions of 4.4 per if the UK leaves under the withdrawal agreement London has agreed with the bloc. The deal provides for a transition until the end of 2020. [...]

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