DUBLIN: Ireland’s central bank on Wednesday cut its growth forecasts for 2016 and 2017 because of Britain’s vote to leave the European Union but said the full impact would depend on the details of any Britain-EU deal.
The bank cut its GDP forecast to 4.9 percent this year from a previous forecast of 5.1 percent on April 1 and to 3.6 percent next year from 4.2 percent earlier.
“The close relationship between the Irish and UK economies creates a particular exposure for the Irish economy from Brexit,” the bank said in a quarterly bulletin—its first since a momentous June 23 referendum in which Britain opted for Brexit.
“Both in the short-term and in the longer-term, the economic impact of Brexit on Ireland is set to be negative and material,” the central bank said.
It also warned of the potential for “a protracted period of heightened uncertainty and risk aversion” during negotiations between Britain and the EU.
“The trade outlook is likely to be most affected by the Brexit referendum given the prospect of weaker demand and higher levels of uncertainty,” it said.
The central bank said it expected export growth of 6.4 percent in 2016 to moderate to 4.5 percent in 2017.
Britain is Ireland’s biggest trading partner in several key sectors, including agriculture.
Britain is the destination for 52 percent of Irish beef, 60 percent of cheese and 84 percent of poultry exports.
Almost 200,000 people in Ireland rely on British exports for their livelihoods.
An immediate effect is already being felt as the British pound has fallen against the euro, making Irish exports more expensive in Britain.