EU exit 'may cost Republic hundreds of millions of euros' says Davy economist

Man holding placard about recession
Gary McDonald Business Editor

ECONOMISTS in the Republic fear that the UK's exit from the EU will cost their own economy hundreds of millions of euros.

But they insist it will be "manageable" in the context of Ireland’s economic growth this year of nearly 8 per cent.

Brian O'Reilly, an investment strategist at stockbroker Davy, which has offices in both Belfast and Dublin, said there is now a "clear risk" that UK growth will flat-line or go into recession in the second half of this year.

"The near-term economic impact on the UK is that the result could push the economy into a recession, business and consumer confidence will plummet and investment will be delayed," he said.

"Multinational companies will put contingency plans into action and look to move to other locations within the EU.

"In the best-case scenario the UK economy will contract by 2 per cent but in the worst-case scenario it will experience a contraction similar to the global financial crisis, should it spill over into the banking system," he added.

So how much of a threat does the British exit pose to the Irish economy (the UK currently accounts for 17.5 per cent of Irish exports)?

"Past macro-econometric estimates suggest that a one per cent reduction in UK GDP reduces Irish GDP by 0.3 per cent," he said.

"But on balance, we do not think Brexit will be sufficient to plunge Ireland into recession, but it could push growth down by one to two per cent in 2016/17.

"This, however, appears manageable in the context of Ireland’s 7.8 per cent GDP growth in 2016," O'Reily added.

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