Effects of Irish Economy In Terms of GDP after Brexit

Introduction

It is apparent that Brexit has a great impact on the Ireland. Specifically, the Irish economy is likely to have severe consequences as its Gross Domestic Product (GDP) is anticipated to go down to 3.5 percent lower than it has been the case in the last five years. Basically, Taylor (2017) noted that the first effect will be witnessed in the trade sector since there will be a drop in the export to the UK market. This drop is equated to ten billion pounds in terms of lost output.

Rationale for effects on Irish GDP

With much deliberation on the effects of Brexit on Irish GDP, it is considered that the impact will continue to worsen if no new government policies have been put in place. The unemployment rate will be two points higher. In another dimension, this means that the government deficit would turn to be one percent higher every year as opposed to what would have been the case before Brexit (Donovan & Murphy, 2013). In a period of ten years, this would definitely add close to ten points to the GDP ratio. It is also evident that lower export growth is eminent with extra costs incurred from tariffs especially to firms importing products from Britain.

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On the other hand, the currency market is currently facing challenges especially to Exporters from Ireland and that rely on the UK market. This partially affects bilateral trade flows as the cost of doing business with UK becomes costly. Consequently, the job market is heavily affected as people mobility is restricted (Department, 2016). The same case happens to other big investment decisions. This does not only happen to Ireland, but also to other members of the EU. However, some negative effects can still be overcome if the Irish government instills proper measures to deal with post-Brexit. This entails looking into the environment operating in. For instance, the government would wish to look into the issue of how deal with a weakened Sterling. Additionally, the government would also consider addressing the issue of its supply chain especially on the import of consumer goods.

It would also be of interest to assess ways of expanding its market to other countries especially on the areas where UK has been the main exporter. The other area of concern revolves around FDI. With UK outside EU, it translates to negative Ireland’s economic growth. In addition, Ireland has a lesser market for FDI compared to UK. Therefore, this cannot be of any advantage to Irish GDP.

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Conclusion

There are many ways through which Ireland will be affected by Brexit. To be able to address these issues, Irish government ought to deal with the main issues that highly and directly affects its GDP. For instance, the government has to look for ways of dealing with trade. This includes financial and non-financial services. Foreign direct investment with UK is also critical and new ways of strengthening that are indispensable. Energy is also very essential as it highly determines the GDP. Therefore, Ireland needs to figure out ways of generating energy as well as the issue of labour market.

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References:

  • Taylor, C. (2017). Economic impact for us after Brexit will be ‘severe’, warns report. The Irish Times. Retrieved on 18th February 2017 from: http://www.irishtimes.com/business/economy/economic-impact-for-us-after-brexit-will-be-severe-warns-report-1.2856643
  • Donovan, D., & Murphy, A. E. (2013). The fall of the Celtic Tiger: Ireland and the Euro debt crisis. Oxford: Oxford University Press.
  • Department, I. M. F. M. C. M. (2016). Ireland: Financial Sector Assessment Program. International Monetary Fund.

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