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Hard Brexit could reduce Ireland's GDP 3 percent after 10 years

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Staff Writer | May 5, 2017
A hard Brexit scenario would damage the Irish economy, reducing it by three percent and costing 40,000 Irish jobs after 10 years, the country's central bank warned on Thursday.
Ireland central bank
Exit   Certain sectors and indeed regions of the economy
"Certain sectors and indeed regions of the economy would be disproportionately affected and some small and medium enterprises are likely to be among the hardest hit by Brexit," said Gabriel Fagan, chief economist of the Central Bank of Ireland.

Under a hard Brexit scenario, the United Kingdom would leave the European Union (EU) without a trade agreement and would instead exercise its rights under the most favored nation clause of the World Trade Organization (WTO).

In this case, goods trade would be subject to tariff and non-tariff barriers, which would vary across sectors, leading to more significant negative effects on trade.

In an address to parliament, Fagan said the overall economic effects for Ireland in both the short term and longer term would be negative, adding that the effects would be much worse if no free trade agreement were reached.

In the short term, before new arrangements come into effect, which is not likely to be until at least 2019, the main effects may be felt through the exchange rate and uncertainty, he said.

The value of sterling has generally traded in the range of 10 to 15 percent weaker against the euro since the Brexit referendum in June 2016. This makes Irish exports to the UK more expensive," Fagan said.

"Over the longer term, slower growth in UK consumption and investment, if it materializes, and in particular, any new barriers to trade including tariffs, will also weigh on some Irish firms," he said.

"Ireland is the economy most affected by Brexit due to the fact that we have the highest share of our exports going to the UK and also that the tariff rate on our exports to the UK would be almost double the EU average due to the very high rates on agricultural and food products under WTO rules," he added.

Should a hard Brexit occur, Irish exports to the UK might fall by around 30 percent, which would be equivalent to an overall reduction in Irish exports of over 4 percent, according to the Irish economist.