DUBLIN (Reuters) - A British exit from the European Union could cut cumulative Irish gross domestic product by as much as 1.6 percent by 2021, but the impact on the country would be “containable”, Finance Minister Michael Noonan said on Tuesday.
Ireland’s economy is more vulnerable than any other in the EU should Britain decide to leave in a referendum this week, a government-commissioned report said last year, and Irish ministers have been campaigning for the ‘Remain’ camp.
“Over the period 2017 to 2021, we think the net effect on GDP would be somewhere between 0.5 and 1.6 percent,” Noonan said, and that such a fall would be “containable” within the government’s fiscal plans for the period, which it presented on Tuesday.
“We’re pointing out that there’s a risk from Brexit. It’s not a risk that would damage the general thrust of what we’re saying today.”
Noonan was giving an update on resources available to fund new tax cuts and spending increases and said he would have 1 billion euros at his disposal next year, up from 900 million euros, and a further 10.3 billion for the next four years.
The extra funds were a consequence of stronger than expected tax receipts and marked the second fiscal upgrade this year after economic growth forecasts were raised in April.
Ireland believes its economy will expand 4.9 percent this year, likely making it the fastest growing in the euro zone for a third year running, and Noonan said some 900 million euros more tax would be collected than expected this year.
The government also proposed increasing planned spending on capital investment by 2021 to 32.1 billion euros from the 27 billion euros announced last year.
After sharply cutting its capital budget and postponing major projects under an austerity drive that followed the 2008 financial crisis, the increased spending will tackle bottlenecks that have built up in particular in infrastructure and housing.
Noonan also outlined his plans for setting up a contingency reserve or so-called “rainy day fund” from 2019 once Ireland’s budget is balanced, pledging to contribute 1 billion euros a year to be deployed if there is a shock to the economy.
Putting money aside would also limit the chances of the fast recovering economy from overheating, Noonan said, adding there was currently no sign of that yet.
Additional reporting by Conor Humphries; editing by John Stonestreet