Minister for Public Expenditure, Paschal Donohoe, has confirmed Irish economic growth will be hit by the British decision to leave the EU — but he stopped short of fully ruling out a recession.
Amid the fallout of the referendum result, Taoiseach Enda Kenny looks set to break ranks with his European counterparts this week who want a quick British exit, by insisting London be given more time.
When leaders meet on Tuesday, he is set to express Ireland’s unhappiness at a meeting of six foreign ministers yesterday, as he wants Ireland central to any decision-making.
In an interview with the Irish Examiner, Mr Donohoe conceded that Brexit will hit Irish economic growth in the coming years, and insisted October’s Budget will be unaffected.
“My expectation is that our fiscal space this year and next year will remain unchanged,” he said.
“Brexit could well have an effect on our resources beyond then but that it is very difficult to quantify at the moment. This is a major re-ordering of the political environment that we are now in, and the economic consequences of that are downside. But they are ones to materialise in the medium term rather than the short term,” Mr Donohoe added.
It means we need to start planning how we deal with that scenario, he said.
Asked if he was ruling out a recession, he said: “I can’t make a forecast on that at the moment.”
He added: “Our mid-term forecast put growth at 3% per annum after 2017. We have said that across any given two-year period, it [the impact of Brexit] could be between 0.5% and 1% of national growth or GDP.
“So do I believe we are facing a recession based on the information laid down at the moment? I don’t. But it is conceivable that we are facing a period of economic growth that is lower than we are forecasting at the moment,” he said candidly.
There was turmoil as Scotland’s first minister Nicola Sturgeon said she would consider vetoing a UK exit from the EU. Asked on the BBC if she would consider asking the parliament not to back a motion of legislative consent, she replied “of course”.
Her comments came as British Labour leader Jeremy Corbyn saw his front bench implode with the resignation of many of his shadow cabinet. It came came after shadow foreign secretary Hilary Benn was fired after he told Mr Corbyn he had lost confidence in him.
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