Modelling the Medium to Long Term Potential Macroeconomic Impact of Brexit on Ireland



The ESRI published a paper today, Monday 7 November on 'Modelling the Medium to Long Term Potential Macroeconomic Impact of Brexit on Ireland'. This paper quantifies the potential medium to long term macroeconomic impact of Brexit on the Irish Economy.​ The analysis is part of the Government’s work on preparing for the impacts of Brexit. The ESRI and Department of Finance undertook this modelling work. The paper assumes a no policy change.

The paper shows the potential negative impact of Brexit over the medium to long term on the Irish economy as modelled under three different scenarios: (i) a Norwegian type arrangement (EEA); (ii) a Swiss type free trade agreement (EFTA); and (iii) a more drastic departure from current arrangements where the UK and EU interact on the basis of WTO rules.

The paper highlights that the impact on the Irish economy will be severe.  Looking at the effect ten years after a UK exit, a WTO scenario results in the level of GDP being 3.8 per cent below what it otherwise would have been in a no-Brexit scenario; the bulk of the impact occurs in the first five years. As a result, the level of employment is 2 per cent below what it would otherwise have been, with the unemployment rate nearly 2 percentage points higher. The most severe scenario indicates that the Irish economy will be more severely impacted than the UK  economy.

Despite this, Ireland's preparations for Brexit continues, as they have done for over a year now. As part of Government planning, it’s useful to undertake this kind of economic modelling work, despite how unprecedented Brexit is - for Ireland, the EU and the world. 

The Government is confident that our economy is resilient and that appropriate fiscal policies are now in place. This will help us to adjust to the economic effects of the UK's negotiated withdrawal from the EU.  In Budget 2017, the Minister for Finance introduced a number of measures to help get Ireland Brexit ready:
·         retention of the 9 per cent VAT rate for the hospitality sector;
·         Foreign Earnings Deduction extended until 2020;
·         extension of SARP until 2020;
·         €400 increase in earned income tax credit;
·         rainy day fund and new debt-GDP target of 45 per cent by the mid-part of the next decade.

Budget 2017 is just the start, more measures will be implemented as the EU UK negotiations develop over the two years after Article 50 is invoked. The priority areas for this Government remain unchanged – this is about our citizens, our economy, Northern Ireland, our Common Travel Area and the future of the EU itself.

Further information from:

David Byrne - Press Officer - - 086 026 7978