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Brexit extension set to boost Irish economy, says finance minister

November 12, 2019 at 6:41pm
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The extension of Britain’s scheduled departure from the European Union means there is likely to be some upside to neighbouring Ireland’s economic growth forecasts, the Irish finance minister said on Tuesday.

Ireland presented its budget for 2020 last month assuming Britain would leave the EU without a deal on Oct. 31, a shock forecast to push the state’s finances into deficit and cut gross domestic product (GDP) growth from 5.5% this year to just 0.7%.

Britain agreed a divorce deal with the EU 10 days after the Irish budget, which Prime Minister Boris Johnson hopes to win parliamentary approval for if he retains power after a snap election on Dec. 12 that necessitated an extension of Brexit to Jan. 31.

“The risk of the UK departing the EU without a deal has been averted for now. However, the ultimate outcome is still uncertain and a disorderly Brexit is still possible,” Minister Paschal Donohoe told a parliamentary committee.

“The extension of the Article 50 exit means that there is likely to be some upside to my Department’s forecasts. Indeed, if the withdrawal agreement is ratified, Ireland’s position will, inter alia, improve with increased revenues and lower expenditure than forecast in Budget 2020.”

Donohoe said Irish GDP could grow by around 3.1% next year and he could deliver a budget surplus of 0.5% in such a scenario.

That would still represent a slightly weaker outcome than the 3.3% GDP growth for 2020 his department was forecasting in April before it based its figures on a no-deal Brexit. It had pencilled in a 0.4% budget surplus for 2020 at that point.

Donohoe also flagged that it was conceivable Ireland’s fiscal position for 2019 could be better than the 0.2% budget surplus forecast a month ago due to the “distinct possibility” of stronger than expected corporation tax receipts.

Those receipts, mainly boosted by Ireland’s large cluster of multinational firms, were running 10.6% ahead of government target at the end of October before the largest collection month of the year in November.

Donohoe said he expected corporate tax receipts to increase again next year before plateauing and likely declining at some point as new rules currently under discussion for how big multinationals are taxed around the globe are introduced. (Reuters)