BREXIT STILL A MAJOR RISK TO IRISH ECONOMY
Trade deal rules shift ‘real threat’
BREXIT continues to pose a major threat to the Irish economy despite progress in negotiations over the border, the Central Bank has warned.
Potential changes to trading relations risk hitting export demand and disrupting supply chains, the review said.
The agri-food and manufacturing sectors are particularly vulnerable.
Central Bank deputy governor Sharon Donnery said the economy was continuing to recover, but warned risks were “real and varied”.
She added: “The agreement reached between UK and EU negotiators last week is to be welcomed.
“However, Brexit continues to pose a major risk to the economy given that any final deal is still subject to continued negotiations which will be both significant and complex.
“Without the detail of any final deal, it is prudent we continue to call out the risks.
“Sectors such as agri-food and manufactured goods, which are highly-dependent on the UK for trade, remain vulnerable.
“In the absence of a final trade deal, disruption to supply chains is also a possibility, with many firms currently using the UK as a land bridge for transporting goods.
“Any change to routes or increased border waiting times might mean a knockon increase in prices.
“Meanwhile, high levels of indebtedness in many
Irish firms may deter investment and leave them vulnerable to economic downturn or unable to raise the finance required to alter business models post-brexit.”
The Central Bank noted a slowdown in the British economy could negatively impact Irish retail banks’ profitability as they have significant exposure in the UK market.
The potential of firms to relocate to Ireland is likely to heap additional pressure on the Dublin property market, both residential and commercial, the bank added.
It said, to date, the main impact of Brexit has been exchange-rate movements, particularly the weakening of sterling – a move that put downward pressure on price inflation.
The warnings were outlined in the Central Bank’s second edition of the 2017 Macro-financial
Review.