Pearse Doherty (Donegal, Sinn Fein)
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127. To ask the Minister for Finance if he has analysed the impact on gross domestic product of a British withdrawal from the European Union; and if he will make a statement on the matter. [16839/16]

Michael Noonan (Limerick City, Fine Gael)
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There are numerous sources of uncertainty at present which pose risks to the central forecast set out in the Stability Programme Update 2016. Principal among them is the prospect of the UK voting to leave the European Union.

An assessment of the potential economic impact of such an outcome is set out below.

Recently published work by both the UK Treasury and the UK's National Institute of Economic and Social Research (NIESR) using model based analysis suggest that a vote to leave the EU could reduce UK GDP by between 2.3 and 6.0 per cent, relative to baseline, under a range of scenarios.

In relation to the impact for Ireland, estimates made using the ESRI HERMES model suggest that a 1 per cent reduction in UK GDP would reduce Irish GDP by approximately 0.2 per cent, relative to baseline, over two years. This implies a possible fall in Irish GDP relative to baseline in the range of 0.5 to 1.2 per cent based on Treasury and NIESR estimates.

A shock to UK GDP would also be expected to impact on our other trading partners. Estimates from the ESRI HERMES model suggest that if euro area GDP were to also fall by 1 per cent, a level estimated in the Treasury's "severe scenario", Irish GDP would fall by a further 0.4 per cent relative to baseline.

Separately, both UK reports predict a depreciation of sterling in the event of a vote to leave. An assessment of the impact of a 5 per cent sterling depreciation, was  presented in the 2016 Stability Programme Update published in April, and indicated a loss in Irish GDP of 1 per cent after 2 years. This result also incorporates the impact on Ireland of wider spillover effects on the global economic environment from a sterling depreciation.

In addition to the macroeconomic assessments set out above, it must also be recognised that a UK decision to leave the EU will increase short term uncertainty and volatility in the financial markets potentially leading to negative outcomes internationally and in Ireland beyond those set out above.