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The financial regulator has laid bare the impact of the UK crashing out of the European Union, which it said could significantly alter the path of the Irish economy.<\/p>\nThe financial regulator has laid bare the impact of the UK crashing out of the European Union, which it said could significantly alter the path of the Irish economy.<\/p>\n
The Central Bank published its analysis of the possible effects of a disorderly no-deal Brexit in its first quarterly bulletin of 2019.<\/p>\n
It found that it could cause \u201cimmediate disruption\u201d in financial markets, as well as further falls in the value of sterling which would adversely affect the competitiveness of exporters.<\/p>\n
It said that a deterioration in economic conditions could cause Irish firms to cut back investment and consumers to reduce spending, while a disruption to supply chains and the transportation of goods into and out of the country could unsettle production and lead to higher costs.<\/p>\n
The analysis also suggested that a no-deal Brexit could lead to a reduction in exports due to lower demand from the UK, higher tariff and non-tariff barriers, such as checks and paperwork, and exchange rate effects.<\/p>\n
Economic growth is also expected to decline by up to four percentage points in the first full year.<\/p>\n
In a statement, the Central Bank said: \u201cGiven the unprecedented nature of Brexit, a situation that is without historical precedent, there is considerable uncertainty around potential Brexit outcomes.<\/p>\n
\u201cIt is important to note some mitigating factors that might improve the outlook of a disorderly exit.<\/p>\n
\u201cThese include extending the UK\u2019s exit date, which would allow firms and households more time to prepare, and a potential increase in foreign direct investment that might otherwise have been destined for the UK.<\/p>\n
\u201cFurthermore, in the financial services sector, substantial preparatory work has already been undertaken to mitigate the most immediate and material \u201ccliff edge\u201d financial stability risks.\u201d<\/p>\n
Mark Cassidy, director of economics and statistics, said: \u201cA disorderly no-deal Brexit has the potential to significantly alter the path of the Irish economy in both the short and medium term, with a substantial and permanent loss of output.<\/p>\n
\u201cThat said, employment and growth are still expected to remain positive overall, while much work has been done to guard against the risks facing the financial system which the Central Bank oversees.<\/p>\n
\u201cAlthough Brexit continues to dominate headlines, we cannot ignore the other risks facing the economy, such as overheating and the international trade and taxation environment.<\/p>\n
\u201cOur ability to withstand any future downturns in the economy will be greatly enhanced by building up larger surpluses and buffers in the public finances now, especially if a no-deal Brexit can be avoided.\u201d<\/p>\n