A growth rate of less than 1% and a sharp decline in employment opportunities will be among the consequences of a no-deal Brexit, the Central Bank has warned.

In the monetary authority’s latest Quarterly Bulletin, director of economics Mark Cassidy stated: “Our current projection is that in the event of a no-deal Brexit the economy would expand by 0.8% in 2020, as opposed to 4.3% if a deal can be agreed.  

“Our forecast is for around 73,000 fewer jobs being created by the end of 2021 compared to a situation where a deal on Brexit can be reached.”

The bulletin emphasises, however, that if a disorderly Brexit can be avoided, underlying economic activity will grow at a relatively solid pace in coming years.

In the event of a deal, GDP growth is forecast to be 5.0% in 2019, 4.3% in 2020 and 3.9% in 2021. A no-deal Brexit is forecast to reduce GDP growth to 4.7% in 2019, 0.8% in 2020 and 1.9% in 2021.

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Similarly, if there is a deal the bank forecasts that unemployment will move lower, averaging 4.8% in both 2020 and 2021. In the event of no- deal, the unemployment rate will rise to 5.8% in 2020 and 6.9% in 2021.

Cassidy added: “This is the first time the Central Bank has published two forecasts for the Irish economy, and this is due to the extraordinary and unprecedented nature of the Brexit process. 

“In the event that a no-deal Brexit were to occur, there would be a significant weakening of activity across many parts of the economy. Regions and sectors that are more reliant on trade with the UK and which are more vulnerable to the imposition of tariffs and non-tariff barriers, particularly sectors such as agriculture, food and the broad SME sector, are likely to be more adversely affected.”

Acknowledging that the economy has been growing strongly in the first half of this year despite rising uncertainty about the economic outlook and a less favourable external economic environment, Cassidy stated that significant domestic and external risks and uncertainties threaten that outlook — and not all are down to Brexit.

The outlook for global economic activity has continued to worsen in recent months, he pointed out: “Given the position of Ireland as a small, highly open economy, the state of global economic conditions has an important bearing on Irish economic performance. Risks in relation to trade and taxation also persist.”

The Central Bank's Quarterly Bulletin is available here.