ESRI (1): Brexit could take €600 million out of budget
The Economic and Social Research Institute reckons a hard Brexit could leave a €600 millon hole in the government’s budget over the next three years. In its latest Quarterly Economic Commentary, it writes: “The need for caution on the public finances is reinforced by the results of analysis presented in the Commentary using the new structural model of the Irish economy (COSMO).” This was the model it developed late last year with the Finance Department and the Central Statistical Office following publication of its ground-breaking Working Paper 550 on the sector-by-sector impact of various Brexit scenarios.
“The analysis uses the model to examine the impact on Irish potential output of different Brexit possibilities. The results indicate that a ‘hard’ Brexit would reduce Irish potential output by more than 3 per cent over the medium term. While this has a number of important policy implications, it has specific relevance for the public finances as it is central to the expenditure rule in the Stability and Growth Pact (SGP). It essentially means that there will be less fiscal space available to the Government than would otherwise be the case. Our estimates indicate that that the fiscal space available could be reduced by over half a billion Euro for the first three years of a ‘Hard Brexit’.”