Dáil Éireann Debate, Thursday - 26 January 2017
52. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which his Department monitors the impact of Brexit on the public and private sectors here with a view to addressing any issues; and if he will make a statement on the matter. [3707/17]
Amharc ar fhreagraMy Department has been assessing and preparing for the impact of Brexit since well before the referendum on 23 June 2016. Work was carried out in my Department to assess the potential economic implications arising, including through the ESRI-Department of Finance research programme study published in November 2015 titled 'Scoping the Possible Economic Implications of Brexit on Ireland'.
Since the referendum, my Department has been closely monitoring developments at both the macro and sectoral level. Early macroeconomic indicators suggest that the immediate impact from the UK decision is more muted then initially anticipated. In particular, third quarter national accounts data provide clear evidence of continued momentum in the economy with GDP increasing by 6.9 per cent year-on-year.
In relation to the public finances, the recent end-year Exchequer data would also indicate that we remain on course to record a deficit of 0.9 per cent of GDP for 2016.
However, it is important to note that the impact of the UK decision is likely to materialise with a lag. As a result, my Department lowered its Budget 2017 GDP growth forecast for this year by approximately ½ percentage point reflecting the outcome of the referendum.
My Department will continue to closely monitor developments and will publish updated macroeconomic and fiscal forecasts as part of the Stability Programme Update, in April this year.
In addition, my Department published detailed analysis of sectoral exposure to Brexit across the economy. This showed that the sectors most impacted by Brexit are generally small scale indigenous enterprises, with high levels of regional employment, relatively low profit levels, that are highly linked to the rest of the economy. In terms of indigenous sectors Food and Beverage and Traditional Manufacturing are highly dependent on the UK both as a source of exports and for overall turnover.
Ireland's exposure to the UK is not isolated to the indigenous sectors, with, for example, pharmaceutical manufacturing, financial and ICT services having a substantial export relationship with the UK. Certain other services sectors such as the indigenous Tourism and Hospitality sector (which is heavily dependent on UK tourists) will be equally exposed to the competitiveness challenges posed by the recent appreciation of the euro-sterling bilateral rate.
On the basis of all the analysis a number of measures were announced in Budget 2017 with a view to making Ireland Brexit ready.
It is important to stress that the best and most immediate policy under the Government's control to counter the likely negative economic impacts of Brexit is to prudently manage the public finances in order to ensure that Ireland's economy continues to remain competitive in the face of future economic headwinds.
In this context, Budget 2017 signalled a lower debt target of 45 per cent of GDP for the mid-to-late 2020s. This will help to provide an additional fiscal 'shock absorber' capacity to the public finances to help withstand any shock including the impact of Brexit. This will complement the contingency or 'rainy day' fund to be established following the achievement of a balanced budget in 2018 which will help provide a further counter-cyclical buffer.
