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Brexit Issues

Dáil Éireann Debate, Wednesday - 5 July 2017

Wednesday, 5 July 2017

Questions (36)

Pearse Doherty

Question:

36. Deputy Pearse Doherty asked the Minister for Finance his views on whether his Department’s projections of the potential impact of Brexit are reliable in view of recent comments by the ESRI and the Irish Fiscal Advisory Council; and if he will make a statement on the matter. [31449/17]

View answer

Written answers

My Department has incorporated the estimated impact of a “hard” Brexit into the macroeconomic forecasts published in the Stability Programme Update 2017. This shock is projected to reduce GDP growth by approximately 0.7 percentage points on average per annum over the 2019-2021 period (i.e. relative to what would otherwise have been the case). These forecasts were endorsed by the Irish Fiscal Advisory Council (IFAC).

These projections were informed by Department of Finance – ESRI joint research which modelled the medium to long term impact of Brexit on Ireland. In particular, the forecasts were guided by the “WTO scenario”, whereby the UK and EU do not conclude a bilateral trade agreement and instead the UK exercises its rights under the Most Favored Nation (MFN) clause of the WTO. I would point out that the IFAC welcomed the use of explicit-model based estimates to inform the Department’s medium-term outlook in the June 2017 Fiscal Assessment Report.

My Department also highlighted in the Stability Programme that risks are firmly tilted to the downside. In particular, the potential impact of Brexit is still highly uncertain and could be worse than anticipated.

The best way to mitigate such risks is to improve the resilience of the economy. The Government will play its part by continuing to implement competitiveness-oriented policies – including those that address emerging bottlenecks – and ensuring that the public finances continue to be managed in a prudent fashion.

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