In March, my Department and the ESRI published a comprehensive assessment of the potential macroeconomic impact of Brexit on the Irish economy.
This report shows that compared to a no Brexit baseline, the level of GDP in Ireland, ten years after Brexit, would be around 2.6 per cent lower in a Deal scenario and 5.0 per cent lower in a Disorderly No-Deal scenario. This assessment shows that all Brexit scenarios will imply a slower pace of growth with negative consequences throughout the economy and that the harder the Brexit the more negative the outcome.
The lower growth outlook would have implications for the labour market and government finances. The negative impacts will be most keenly felt in those sectors with strong export ties to the UK market with their suppliers. The impact will be particularly noticeable in the regions.
The Government has already taken significant action to get Ireland Brexit ready. Since the UK referendum, all of our national Budgets have been framed to prepare for the challenge of Brexit with dedicated measures announced in Budgets 2017, 2018 and 2019.
My focus, as Minister for Finance, is to protect our economic and financial interests, and to minimise the disruption to the Irish economy to the greatest extent possible. We have worked hard to rebalance our economy from where it was twelve years ago, before the global financial crisis. Growth and resilience in our economy today is evenly spread across a range of sectors, equipping us to better withstand a sudden external shock.
At the same time, we have prioritised building up the resilience of the economy and the public finances, so that we have the capacity to deal with an adverse economic shock. We have set aside €1.5 billion in a Rainy Day Fund. We are supporting our companies to prepare for Brexit, to diversify their markets and supply chains, to develop new skills and to explore new opportunities.
The Government will continue to work to strengthen the resilience of the economy, to maximise opportunities and to prepare our economy for the challenges of Brexit, including through the Ireland Connected Trade and Investment Strategy, the 10-year National Development Plan and Future Jobs Ireland 2019.
The Government welcomed the decision of the recent European Council to extend the Article 50 process until 31 October 2019. The extension includes giving the UK flexibility to leave before that date should the Withdrawal Agreement be ratified.
The Government remains focused on the ratification of the Withdrawal Agreement as the best way to ensure an orderly withdrawal of the UK from the EU and to fully protect the Good Friday Agreement. The decision of the European Council provides the UK with more time to ensure an orderly withdrawal. However, while it means that the immediate risk of a no deal Brexit has receded, it has not been fully averted. The preparations that have been taking place since before the Brexit referendum are therefore continuing and my Department continues to work within the whole-of-Government approach and to coordinate closely with its agencies in developing and implementing plans and measures to protect our economy.
In particular, my Department is working closely with the Central Bank of Ireland, the National Treasury Management Agency and the Office of the Revenue Commissioners.
The Central Bank has statutory responsibility for financial stability and has been focused on Brexit since before the UK referendum. It is working closely with financial services firms to ensure appropriate contingency planning arrangements, and that they are adequately prepared to cope with the possible effects of Brexit, with as little disruption for consumers as possible. In relation to the funding of the State, the NTMA’s strategy continues to take account of the market dislocation risks posed by Brexit and the Exchequer’s funding position is strong. Within the Revenue Commissioners, there is a very significant programme of work that has been ongoing in terms of ICT, staffing and engagement across the country with the business community with the objective of minimising disruption to trade and supporting business to be as prepared as possible.
I am satisfied that the Department and its relevant agencies are continuing to work to ensure that they are as prepared as possible to limit the inevitable disruption to the economy and to citizens post Brexit.