Ireland’s leading think tank on Wednesday cut its standard forecast for Irish economic growth in 2019 to 3.8%, and warned that the country’s economy would grow by just 1.2% in the event of a “disorderly” no-deal Brexit.
The new forecasts mean that the growth of Ireland’s economy is expected to be dented by nearly 75% if the UK leaves the European Union without a deal.
The think tank, the Economic and Social Research Institute (ESRI), had previously said that such a scenario would halve economic growth.
The lower expected pace of growth in 2019 can be generally explained by a “slowdown observed in the global and European economies since the end of last year,” the ESRI said in a statement.
It also said that it expected the Irish economy to grow by 3.2% in 2020 in a normal scenario, and by 2.4% if there is a no-deal Brexit.
The think tank said that there were “persistent uncertainties with respect to the form of the UK’s withdrawal from the EU,” and that its most severe predictions were reserved for what it called a “disorderly no-deal” situation.
The results of the ESRI’s analysis suggest that employment levels would be 3.4% lower than if the UK stayed within the bloc.
A “disorderly” no-deal scenario would involve “additional disruption to trade in the short-run” compared to what it considers to be the standard impact of a no-deal situation, the think tank said.
The new study estimates the impact of Brexit on the Irish economy by looking at the impact on trade. This was done by attempting to predict the impact of the UK’s tariff and non-tariff measures, but also included the potentially positive impact of foreign direct investment diversion to Ireland from the UK.
“Ultimately, while the [foreign direct investment] effect is expected to have a positive effect on Ireland, the positive impact is outweighed by the negative trade effect,” the ESRI said.