Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I will first give the Deputy my assessment, after which we can ascertain how it dovetails with that of the Department. We are living in a very uncertain world. The result of the presidential election in the United States is unforeseeable at this point and we do not know what changes of policy could occur or what would be the impact if the Republican candidate were to win the contest.

Second, there is uncertainty across Europe. Colleagues in the Eurogroup and ECOFIN have been describing events in their countries. Europe is beginning to grow again but growth has not been strong and there is a lack of investment throughout Europe. While quantitative easing has helped, it has not helped as strongly as those who developed the policy anticipated at the point of development. We also have all the usual problems in north Africa and the Middle East. The main problems in Europe are low growth, political instability, a migratory problem that has not been resolved, a security problem which breaks out in many of the democracies and various threats externally.

When one brings the issue back home, Brexit is obviously a big issue from our point of view. The Department's initial assessment is that the announcement of Brexit or the UK's vote to leave the European Union will have an adverse impact on Irish GDP of approximately 0.5% for 2017. We have built this assessment into the figures. While there will be other consequences, we will not know what they are until the elements of the negotiation between the United Kingdom and European Union fall into place. We do not yet have a roadmap because the UK authorities have not yet indicated what will be their approach, much less its specifics. If one set of specifics were to come into place, it would give rise to a set of risks that we would have to measure. If the UK authorities were to pursue another set of priorities, the risks would be different, however, and we would have to assess what impact they might have on the economy. While we can foresee risk in general, it is hard to be specific until the specific outcomes of the negotiations are in place.

I met the British Chancellor of the Exchequer, Philip Hammond, MP, at the informal ECOFIN meeting in Bratislava and I will meet him again on Thursday in London, which I will visit tomorrow. I may have a better read of the position after I have met with Mr. Hammond for an hour or so to go through the details. There is currently no blueprint and we do not even know when the UK authorities will invoke Article 50, which is the trigger for withdrawal from the European Union.

Brexit carries considerable risk. What we can do in the budget is ensure we do not take chances and ensure the budget is low-risk. We could, for example, include provisions for the future which would act as a form of shock absorber to risk, the proposed rainy day fund being one such example. This type of fund would help in an uncertain world. We can also do other things and I am working on what we can do on a macro level on budget day.

Deputy Michael McGrath is correct that it is a difficult world and most of the risks one can see on the horizon are not yet measurable. What we have measured is a 0.5% projected reduction in GDP for 2017. This reduction will still leave us with strong growth figures, however, and if we were calculating the fiscal space now, we would be in roughly the same position. The fact that it is locked in gives us less flexibility to move it around but the same numbers are solid. There are slight variations right up to budget day and there will be movement on the fiscal space but I do not expect it to be dramatic.