Dáil Éireann Debate, Tuesday - 30 January 2018
173. Deputy Bernard J. Durkan asked the Minister for Finance if he is satisfied that Ireland can continue to prosper and increase its trade with non EU countries to an extent sufficient to counter losses from Brexit. [4633/18]
View answer178. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he expects economic growth to continue as before after Brexit; and if he will make a statement on the matter. [4639/18]
View answer179. Deputy Bernard J. Durkan asked the Minister for Finance if he expects current economic progress to continue notwithstanding the possible impact of Brexit; and if he will make a statement on the matter. [4640/18]
View answerI propose to take Questions Nos. 173, 178 and 179 together.
My Department’s most recent economic forecasts were published with Budget 2018. Real GDP growth of 3.5 per cent was projected for this year while growth is forecast to average almost 3 per cent over the period 2019 – 2021.
These forecasts incorporate the estimated impact of a “hard” Brexit. This shock is projected to reduce GDP growth by approximately ¾ percentage points on average per annum over the 2019-2021 period relative to a no Brexit baseline. 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 Favoured Nation (MFN) clause of the WTO. Under this scenario, exports are projected to be almost 5 per cent lower after 10 years relative to a no Brexit baseline.
The data flow since the Budget has been encouraging indicating that the strong momentum has continued:
- Real GDP grew by 10.5 per cent in the third quarter of 2017 on an annual basis. This follows annual growth of 6.3 per cent in the second quarter.
- The volume of retail sales increased by 6.8 per cent year-on-year in November 2017. Core sales (excluding motor trades) were up by 7.6 per cent over the same period.
- Expansion in the construction sector continued in November with the Purchasing Managers’ Index increasing to 56.7.
- The Consumer Sentiment Index was 103.2 in December, well above its long run average.
- The seasonally adjusted monthly unemployment rate for December was 6.2 per cent, down from 7.5 per cent in December 2016. As a result, the unemployment rate has fallen by more than half since its peak of 16 per cent in early-2012.
On this basis, the economy remains on course for continued strong growth this year. However, we do face considerable economic challenges including Brexit. The best way to mitigate such risks is to improve the resilience of the economy through competitiveness orientated policies and prudent management of the public finances. To this end, a number of measures were included in Budget 2018.
In addition, as part of the Government’s trade strategy, Ireland Connected, a number of measures have been set out to specifically address Brexit related issues, including diversification of markets for indigenous exporters. Greater market diversification must be part of the policy response, so that dependence and exposure to the UK market is reduced.
