Any form of Brexit will be damaging for Ireland, the Governor of the Central Bank has said.
Gabriel Makhlouf said Brexit represents an enormous change and transition for society, businesses and the economy as a whole.
In his first keynote speech since being appointed Governor of the Central Bank of Ireland, Mr Makhlouf said the Republic of Ireland has a small open economy that leaves it vulnerable to external risks such as Brexit.
“Our work on Brexit has spanned across our mandates, and we have published extensive analysis of, and advice on, the risks and the steps required to mitigate them. Ensuring that people, households, firms and the country adapt, adjust, and manage this change is a constant process.”
Mr Makhlouf was addressing students at Waterford Institute of Technology on Wednesday morning.
Speaking to students and staff at the Waterford Institute of Technology, and the Chamber of Commerce, Governor Makhlouf highlighted the vulnerability of the Irish economy, particularly in the context of Brexit and the risk of escalating trade wars. https://t.co/nuXSw3XtXu pic.twitter.com/0m05U20qrg— Central Bank of Ireland (@centralbank_ie) November 20, 2019
“Brexit will inevitably bring disruption – even with a ‘deal’ – which, by its very nature, will dissipate over time. But we must not lose sight of the inevitable long-term costs. Any form of Brexit will be damaging for Ireland.”
He said the Central Bank has been preparing for Britain’s exit from the EU for some time but the Withdrawal Agreement is stage one of a longer process.
While the UK is set to leave the EU at the end of January, Prime Minister Boris Johnson has yet to get the Withdrawal Agreement ratified by Parliament.
Mr Johnson is hoping to secure a majority in December’s General Election in order to enable him to achieve that.
“Our work will continue over the coming weeks, months, and indeed years as we all transition to the new arrangements, whatever they may be. The fact is that the process is far from over – simply having a Withdrawal Agreement is not the end of the road but only the end of the beginning,” he said.
Mr Mahklouf said analysis from Central Bank economists shows that a disorderly Brexit or a permanent loss of corporation tax revenue could result in the level of debt remaining above 90% of national income “well into the middle of the next decade”.
He said it was crucial the level of public debt be reduced so that public finances can withstand the negative shocks Brexit could potentially bring.
He said economic resilience is needed for the country to meet the economic challenges ahead.
“Building economic resilience is not like building a bulwark and then assuming the job is done. There is no one-off solution to the challenge of building resilience. It is a continuous process, involving individuals, households, businesses, institutions and authorities, such as the Central Bank, both at home and abroad.
“Irrespective of the particular ‘shift’ or ‘shock’, rapid change in the world around us and our openness and international interconnectedness mean we need to build resilience.”
He said that while the Republic of Ireland’s economy has benefited greatly from its openness, the economic crisis and recession “showed just how vulnerable we are to shifts in global economic and financial conditions, in particular when large domestic imbalances are allowed to build up”.