Seán Sherlock (Cork East, Labour)
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82. To ask the Minister for Finance if he has considered the Economic and Social Research Institute's HERMES suggestion that a 1% reduction in the United Kingdom gross domestic product arising from its exit from the European Union will reduce Irish gross domestic product by approximately 0.2% over two years; and if he supports the estimates provided by the United Kingdom Treasury and United Kingdom NIESR. [20105/16]

Michael Noonan (Limerick City, Fine Gael)
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In advance of the UK referendum, my Department conducted a risk analysis of the possible economic impacts on Ireland from a UK exit, the results of which were published in Box 2 of the Summer Economic Statement.  The analysis used the ESRI HERMES macroeconomic model to estimate the impacts on Ireland, based on a range of scenarios for the UK. The HERMES model has been used for over 25 years to carry out medium-term forecasting and scenario analysis of the Irish economy and is routinely utilised by the Department of Finance for policy and risk analysis.  

In relation to the figure that a 1 per cent reduction in the Gross Domestic Product (GDP) of the United Kingdom would reduce Irish GDP by 0.2 per cent over a two year horizon, this represents the impact of a generic permanent fall in UK GDP. This figure should thus be taken as a general rule of thumb, based on historical relationships, for translating the impact of GDP changes in the UK on Ireland.

The estimates produced by HM Treasury and the UK National Institute of Economic and Social Research (NIESR) represent a broad range of potential scenarios and suggest a reduction of UK GDP of 2.3 to 6.0 per cent over two years relative to a vote to remain. These numbers are estimates for an outcome of an event which at this point is characterised by a large number of uncertainties. However, based on the historical relationships between the UK and Irish economy, these estimates would imply a fall in Irish GDP, relative to a remain outcome, in the range of 0.5 to 1.2 per cent over two years.