Brexit and the Economy
Department of Finance preparations
Internally the Department of Finance undertakes rolling analysis which focusses on the key policy issues arising for the Department:
- Macroeconomic impact
- Financial Stability issues
- EU financial services policy
- Irish financial services sector
- EU Budget
Given the potentially negative political and economic risks that could result from Brexit, we need to seize this current opportunity to rebuild fiscal capacity through eliminating budget deficits and targeting the reduction of our stock of debt. This will complement other initiatives such as putting aside some of the historically high levels of corporation tax for the purpose of creating the Rainy Day Fund. In order to achieve this the Government is taking a number of measures aimed at building fiscal resilience which are outlined below.
Budget 2018 Measures
- Budget 2018 announced a number of measures to assist in preparing our economy for the unprecedented challenges posed by Brexit.
- On the fiscal side, the Government continued its policy focus of enhancing the resilience of our public finance to any Brexit-related shock. Specifically, for 2019, our current projections show Ireland complying with both fiscal rules and overachieving on our Medium Term Budgetary Objectives.
- Complementing this, Budget 2018 further established the 1.5 billion ‘Rainy Day Fund’, with 500 million a year being added starting in 2019. This fund provides a further counter-cyclical buffer, and represents an important measure to strengthen the economy’s shock absorption capacity.
- Budget 2018 also announced further measures to prepare Ireland’s economy for the significant challenges ahead. These measures include:
i. A new €300 million Loan Guarantee Scheme for Brexit-impacted business and a complementary €25 million Agriculture Brexit Loan Scheme – aimed at enhancing the competitiveness of the businesses most exposed to Brexit;
ii. An increase in staffing levels in state agencies in order to coordinate our response to Brexit;
iii. The introduction of a Key Employment Engagement Programme (KEEP) – a new incentive to attract key employees;
iv. Prioritising investment spending that mitigates risk, enhances the resilience of the economy and raises our growth capacity. This is also reflected in the National Development Plan and Project Ireland 2040
Where Brexit presents potential opportunities, we will of course seek to maximise these. In relation to international financial services (IFS), Minister of State Michael D’Arcy T.D. has responsibility for the implementation of our IFS2020 Strategy. We will continue to leverage the IFS2020 Strategy in order to maximise potential opportunities in the IFS sector. The latest iteration of the Strategy, the IFS2020 Action Plan 2018, places a strong focus on Brexit and is fully integrated into the wider cross-Government Brexit contingency planning.