Dáil Éireann Debate, Wednesday - 31 March 2021
313. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the economy is withstanding the double impact of Brexit since the beginning of 2021; the degree to which specific or unforeseen issues have arisen which may need a response; and if he will make a statement on the matter. [1835/21]
View answer314. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which Ireland’s economy is withstanding the double impact of Covid-19 since the beginning of 2021; the degree to which specific or unforeseen issues have arisen which may need a response; and if he will make a statement on the matter. [1836/21]
View answerI propose to take Questions Nos. 313 and 314 together.
As the interplay between the Covid-19 and Brexit shocks has implications for the economic outlook, my Department, along with the ESRI, conducted an analysis of the sectoral overlap between the two shocks. The analysis found that the sectors most exposed to both the Covid-19 and ‘disorderly’ Brexit shocks appear to be distinct and relatively unconnected. While the analysis was based on the assumption of a ‘disorderly’ Brexit, this general conclusion is still applicable today.
Although the Trade and Cooperation Agreement between the EU and the UK provides for zero-tariffs and zero-quotas for qualifying goods, it will nevertheless introduce trade frictions in the form of non-tariff barriers. It is also a considerable ‘step-down’ in terms of services trade relative to the previous EU-UK relationship, which is significant as Ireland exports considerably more services than goods to the UK. Therefore, while the newly formed agreement protects Irish firms from the more significant impact of a ‘disorderly’ Brexit scenario, they will still be impacted by the change in trading arrangements. Thus, it represents a smaller Brexit shock for the same sectoral mix of Irish firms as under a no-deal scenario.
My Department will publish updated macroeconomic forecasts that account for both the Covid-19 and Brexit shocks as part of the Stability Programme Update in April. It is likely that the current restrictions will have a contractionary impact on the economy in the first half of the year. Indeed, their impact on the economy is already evident with many additional people relying on income support schemes as a result. The number of recipients of the PUP stood at 443,000 as of 29th March, an increase of 150,000 since the restrictions were introduced in December, though this remains well below the peak of 600,000 recorded in May last year.
Crucially, however, the vaccine programme is now underway and there is light at the end of the tunnel. While this process will undoubtedly take time and restrictions will be required in the near term, as the vaccine programme picks up speed, restrictions will gradually be eased, allowing an economic recovery will take hold.
