ESRI: Govt may need supplementary Budget in 2020 to respond to Brexit

A supplementary Budget may be needed in early 2020 to respond to Brexit, according to the ESRI.

The ESRI's latest report, which was released this morning, reveals that Ireland's economy could face a "sizable and immediate shock" if there is a no-deal Brexit.

Despite a positive outlook on Ireland's economy for 2019, uncertainty over Brexit still remains.

The ESRI's quarterly report found GDP is set to increase by just under 5% this year, with growth slowing to 3.1% in 2020, but it does come with the caveat that the UK remains in the EU after October 31.

However, as ESRI senior researcher Conor O'Toole explains, a no-deal scenario does not paint such a positive picture.

Mr O'Toole said: "It is very clear when we model a no-deal, disruptive scenario that the economic shock is sizable and will be immediate to the Irish economy."

The ESRI said it's "not inconceivable" that the Irish economy could instead contract in 2020 if there is a no-deal Brexit.

It acknowledges that such concerns make "the choice of the appropriate policy mix for Budget 2020 particularly complex".

The body said a supplementary Budget may be required in early 2020 if "external conditions change substantially".

Mr O'Toole said: "One of the warnings that we're putting in the current commentary is that if that happens, and there is a disorderly no-deal immediately... we could well have a contraction in economic activity next year."

The body also forecasts the economy could go one of two ways depending on Brexit which will also impact on Budget policy.

Mr O'Toole said it could make things very complicated, saying: "If there is a deal or an agreement and the economy continues to grow at pace, or we have a no-deal scenario which is a big economic shock."

The ESRI has also revised down its predictions for the number of housing completions in 2019 to 21,000 units, compared to 23,500 earlier this year.