- The Department of Finance’s Budget 2020 forecasts, as endorsed by the Irish Fiscal Advisory Council, show that a no-deal Brexit will have a significant impact on Irish economic growth.
- GDP is projected to grow by 5.5 per cent in 2019, slowing to 0.7 per cent in 2020.
- Growth in 2020 has been revised down by 2.6 percentage points since the Department’s spring forecasts reflecting a weaker global economy and the impact of a no-deal Brexit.
- Employment growth to slow to 0.8 per cent next year with the unemployment rate expected to rise to 5.7 per cent.
- This is the first time that a national or international forecasting institution has published a full range of economic projections for a no-deal Brexit scenario.
The Department of Finance has today published its macroeconomic forecasts, covering the period 2019-2024. This is the first time that a national or international forecasting institution has published a full range of economic projections (covering GDP and its components, price developments, labour market indicators, etc) for a no-deal Brexit scenario. These forecasts were endorsed by the Irish Fiscal Advisory Council on 30 September following a period of engagement between the Department and the Council.
Commenting on the endorsement, Minister for Finance and Public Expenditure and Reform, Paschal Donohoe T,D, said: “I welcome the Irish Fiscal Advisory Council endorsement of the macroeconomic projections for Budget 2020.”
“As set out by the Government, Budget 2020’s central scenario projections assume that, for budgetary planning purposes, the UK will exit the EU without a ratification of the Withdrawal Agreement at the end of October, i.e. a no-deal exit. Under this scenario my Department’s forecasts show that the GDP growth rate will fall to 0.7 per cent next year in a no-deal scenario.”
“While the economy will still grow, the impact of lower growth will be significant, particularly in certain parts of the labour market. New jobs will still be created but at a slower rate. My Department’s forecasts show 53,000 fewer jobs will be created over the next five years compared to a no Brexit.”
“Even without a no-deal Brexit the economic outlook has deteriorated in recent months. The international environment continues to worsen, particularly in the manufacturing sectors in some of our closest trading partners. A no-deal Brexit just adds to the heightened global economic uncertainty.”
“As the Government has outlined over recent weeks, the impact on the most-exposed sectors of the economy from a disorderly Brexit could be very severe. Careful management of the economy and of the public finances is needed now more than ever in order to chart our way forward through the uncertain times ahead. This is why we are planning the Budget on the basis of a no-deal Brexit; this is the safest approach”
Ends
Note to editors:
The Irish Fiscal Advisory Council has a statutory obligation under the Fiscal Responsibility Act 2012 to endorse, as appropriate, the macroeconomic forecasts prepared by the Department of Finance on which Budget 2020 will be based.
The Department provided its Budget 2020 forecasts—which cover a five-year-ahead forecast horizon—to the Council on 23rd September 2019. The Council discussed these forecasts with the Department of Finance on 27 September 2019, ahead of the Council’s endorsement meeting.
The Council’s approach to endorsing the Department’s macroeconomic forecasts has three elements:
- a comparison of the Department of Finance’s macroeconomic forecasts to the Council’s Benchmark projections;
- a consideration of the methodology used to produce the forecasts; and
- a review of past forecast errors for evidence of systematic bias.
The Department’s Budget 2020 disorderly Brexit projections are based on results from joint research undertaken between the ESRI and the Department of Finance published in March 2019. Available at: https://www.gov.ie/en/publication/ca41b6-r/
The
Department’s presentation to the Fiscal Council (published today alongside the
endorsement letter from the Fiscal Council) sets out the Department’s views on
the economic outlook and risks, its methodological approach to formulating a
set on no-deal projections, and the projections themselves covering the period
2109-2024. A summary of the projections for this year and next is provided
below:
https://www.gov.ie/en/publication/0e7c9e-irish-fiscal-advisory-council-endorsement-letter-2-october-2019/
Table 1: Budget
2020 projections
| Growth rate (unless otherwise stated) | 2018 | 2019 | 2020 |
| GDP | 8.2 | 5.5 | 0.7 |
| GNP | 6.5 | 4.3 | -0.1 |
| GDP (nominal) | 9.1 | 5.9 | 2.4 |
| Employment | 2.9 | 2.4 | 0.8 |
| Unemployment rate | 5.8 | 5.2 | 5.7 |