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Will the Irish economy continue to grow after Brexit?

Written by Contributor, on 28th Mar 2019. Posted in General

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The economic growth that Ireland experienced during the 1990s and into the following decade was so spectacular that it was referred to as the ‘Celtic Tiger.’ During the ten-year period from 1991 to 2001 the nation’s GDP grew at an average of seven percent and this meant that by 2006 Ireland had gone from being among the EU’s poorest countries to one of its wealthiest. This golden era did not last of course, as Ireland suffered a brutal recession when the inflated property market collapsed in the latter part of the decade.

Irish growth and EU stagnation

Ireland’s economy recovered from this recession impressively though, with growth having returned to 7.5 percent by 2015, and the country is forecasted by the European Commission to have the second highest growth of all EU countries next year – at 4.5 percent. This stands in sharp contrast to what many other EU countries are experiencing. Four countries with larger economies than Ireland – the UK, France, Germany and Spain - are all expected to experience much lower rates of growth next year. Italy is right at the bottom of the European Commission forecast, alongside the UK, at 1.2 percent – and the country’s stagnant economy has led to the election of the populist La Lega/Five Star coalition government led by the controversial Matteo Salvini. Concerns about economic inequalities and market capitalism have been growing since the 2008 financial crash and led to a raft of books on the subject like The Future of Capitalism by Paul Collier. They have even led notable economists like Yanis Varoufakis and Eric Weinstein to argue that the existing capitalist model is unfit for purpose and in its death throes.

Brexit affect

Adding to this turbulence, the imminent departure of the UK from the EU will have economic repercussions for all EU nations, including Ireland. Should the UK leave without a deal, the IMF is predicting a 4 percent drop in the Republic of Ireland economy, while the ESRI – a think tank based in Dublin - expects it to hit each household to the tune of 1,400 Euros per year. Given that key Irish industries like agriculture are heavily dependent on exports to the UK, which currently buys 40 percent of them, it is hard to see how the Irish economy can continue to grow at the same level after Brexit. That said, the UK vote to leave the EU is also opening up new economic doors in Ireland, with the Industrial Development Authority indicating that 30 companies have already opted to shift operations to Ireland as a result of it. The degree to which Brexit affects Irish economic growth likely depends on whether it is a ‘soft’ or ‘hard’ Brexit. The country may be able to absorb the impact of the former, but the latter will put thousands of jobs in the fishing and farming sectors in danger and potentially cost the tourism sector around 390 million Euros a year – particularly if there is a hard border with Northern Ireland.

The Irish economy need not suffer too much following a ‘soft’ Brexit, especially as much of the growth has been fuelled by the presence of corporations based outside of the EU, but a no-deal Brexit does pose serious risks

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