In presenting the Irish Central Bank’s perspective on Brexit impacts on Ireland yesterday, its chief economist Gabriel Fagan highlighted some of the risks and opportunities that the country faces over the coming years.
In relation to risks, Fagan repeated some of the calculations that have been done in relation to the negative impacts on the Irish economy as a result of a hard-Brexit whereby the UK reverts to WTO rules. With 14% of goods exports and 20% of services exports destined for the UK, it has been estimated by the ESRI that Irish exports to the UK may fall by up to 30%, in turn leading to a 4% fall in Irish exports overall. Agri-food, materials manufacturing and tourism would likely to be the most affected in this scenario.
Overall, the Central Bank believes that Irish GDP would be 4% lower over in the medium-term relative to a baseline scenario.
The Central Bank also recognises the potential positive benefits of a hard-Brexit through the FDI channel, but refrained from putting numbers on this impact in yesterday’s presentation. The ESRI though has previously estimated that Irish GDP could be 3% higher over the medium-term as a result of increased FDI.
In relation to the possible FDI flows, Fagan did point out in his remarks yesterday that while the Central Bank does not play a marketing role, it does “expect to see a meaningful increase in applications for authorisation or for extension of existing business”. To this end, the Bank is in the process of increasing its authorisation team to deal with this demand.
According to Goodbody Stockbrokers, "Clearly, the complexity and uncertainty of Brexit is providing many issues for Ireland. The Central Bank is clearly approaching the issue with a sense of caution, but does stand ready to ramp up resources to deal with the flow of FDI in the financial services sector."
Source: www.businessworld.ie
