A no-deal Brexit could reduce Irish economic output by nearly 4 per cent in the long term, estimated to cost more than 50,000 jobs, the International Monetary Fund (IMF) has warned.
In a special study, published alongside its economic outlook for the euro area, the Washington-based fund examined the long-terms implications of Brexit on the euro-zone economy.
It estimated that economic growth across the bloc would fall by as much as 1.5 per cent by 2030 should Britain fall back on World Trade Organisation (WTO) rules for its trading relationship with the European Union after leaving next year.
The impact, however, would be more severe on the UK and the Republic with economic output dropping by 4 per cent in each case.
The IMF study predicted a bigger negative impact from Brexit than previous studies because it modelled the disruption to manufacturing supply chains as well as the effect of tariffs and reduced financial services trade.
The Central Bank here had estimated that a hard Brexit could reduce Irish gross domestic product (GDP) by about 3 per cent, costing up to 40,000 jobs.
‘No Brexit winners’
A soft Brexit scenario with the UK agreeing a free-trade deal with Brussels would have a less malign outcome, the IMF suggested, but would still see Irish GDP reduced by 2.5 per cent by 2030. "The strength of the euro area-UK integration implies that there would be no Brexit winners," the IMF report concluded said.
Nonetheless it suggested the economic damage from Brexit would be minimal if Britain were to adopt the “soft Brexit” Norwegian-style model of being part of the European Economic Area, which the UK government has rejected as it would largely require Britain to stick to EU rules.
A free-trade agreement for manufactured goods – which is closer to what the UK is seeking – would reduce long-term EU losses to 0.8 per cent of GDP, or about $130 billion (€111.5 billion).
In its regular assessment of the euro-area economy, the Washington-based fund said euro-area growth appears to have peaked and that the region faced threats from a trade war with the US, a disruptive Brexit and political shocks across the currency bloc.
It said that while the economy remained strong an “array of global and domestic risks hangs over the outlook”.
The latest of many warnings came as the EU prepares to retaliate if the US decides to impose tariffs on cars. That would mark a further escalation of the tit-for-tat action that has seen the US slap levies on imports from the EU and China.
