Brexit to hit Ireland’s economic growth, according to report

Ireland’s economic growth is set to continue next year – but at a reduced rate, a leading think-tank has warned.

A report by the Economic and Social Research Institute (ESRI) found that while the Irish economy is expected to grow by 3.8% this year, this is at a reduced rate compared to the expected growth outlook.

The lower expected pace of growth reflects the slowdown in the global and European economies since the end of last year.

The ESRI expects the Irish economy to grow by 3.2% next year.

The study estimates that the unemployment rate this year will average to 5.2%, falling to 4.8% in 2020.

Consumption and underlying investment are expected to be important drivers of growth over the period, the report added.

These predictions for 2019 and 2020, however are based on the assumption that the UK will leave the European Union with a withdrawal deal agreed.

The report said: “Given the persistent uncertainties with respect to the form of the UK’s withdrawal from the EU, the Quarterly Economic Commentary examines the impacts of various Brexit scenarios on the short-term outlook.

“Under the most severe scenario of a disorderly no-deal, domestic real GDP is estimated to rise by just 1.2% in 2019 and 2.4% in 2020.”

Last year, the Irish Exchequer recorded a budget surplus of 106 million euro.

The report said that was due to the substantial increase in corporation tax returns for the year.

“While a surplus is a positive development, the sensitivity of key fiscal metrics to the activities of a small number of firms is an ongoing concern,” the report’s author added.

“The exceptionally high levels of corporation taxes witnessed in recent years give rise to the possible presence of significant amounts of windfall tax receipts amongst the exchequer returns.

“A greater reliance on volatile tax receipts poses challenges for fiscal stability over the medium-term.”

It comes after the ESRI warned on Tuesday that a disorderly Brexit could cost some 80,000 Irish jobs.

It found that in the event of a disorderly no-deal scenario, the economic output in 10 years will be 5% lower than if the UK stayed in the EU.

The study also stated that employment would be 3.4% lower, which equates to around 77,500 fewer jobs.