Written answers

Thursday, 24 October 2019

Department of Finance

Brexit Preparations

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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74. To ask the Minister for Finance if his Department is undertaking an economic impact analysis of the current Brexit deal; if he will publish updated fiscal and macroeconomic forecasts based on the current Brexit deal; when he expects such a study to be completed; and if he will make a statement on the matter. [44156/19]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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Budget 2020, including the macroeconomic outlook which underpins its, was based on the prudent assumption that the UK would leave the EU on 31 October without an agreement. The macroeconomic outlook is set out in the Economic and Fiscal Outlook published with Budget 2020. This included, at Box 4, an assessment of the macroeconomic outlook that would apply in the event of an agreed exit by the UK at end October.

The Withdrawal Agreement endorsed by the European Council, will now require ratification by the European Parliament and the British Parliament. Pending ratification of the deal, it is not possible to say if the outlook will be different to that set out in Budget 2020.

If the Withdrawal Agreement is ratified, the UK will enter a transition period until at least the end of 2020. In this situation the outlook would be broadly similar to that set out in Table 4 (Box 4) in the Economic and Fiscal Outlook. This shows that, in the event of an agreed exit, GDP growth is forecast to be 3.1 per cent in 2020, with employment growth projected at 1.7 per cent next year and the unemployment rate expected to be 5.1 per cent.

Until there is greater clarity on the post-transition relationship there is likely to be continued uncertainty, particularly with respect to private sector investment. There are a range of possible future relationships, ranging from a free trade agreement (of which there could be many forms), or a trading relationship under World Trade Organisation (WTO) frameworks. The impact of these have been modelled and estimated earlier this year in joint research by the Department of Finance and ESRI. Over the medium-term (i.e. 5 years) the level of GDP would be of the order of between 1.9 and 3.3 per cent lower, compared to a situation where the UK remains in the EU.

My Department will continue to monitor developments with respect to the ratification of the Withdrawal Agreement, and the future relationship with the UK, and will update the macroeconomic and fiscal projections to take account of any developments in the Spring.


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