Irish economic growth could fall to 2.4 per cent next year, according to Cantor Fitzgerald, which has sharply cut its expectations for the economy in the wake of Brexit.
The broker has cut its 2016 GDP growth estimate to 3.8 per cent - from 4.4 per cent previously - but its forecast for 2017 is now the lowest among major analysts. If Government forecasts fall to the same level by the time of the Budget, it will sharply reduce any room for tax cuts or spending increases for 2017.
Seperately, the first national poll of Irish sentiment on the Brexit referendum result has found that 56 per cent of people believe it will have a negative impact on the Irish economy.
Most respondents to a poll commissioned by public relations firm PR360 said Europe was more important to Ireland than the UK, while 86 per cent were against border controls between North and the Republic.
Some 36 per cent of those polled said they were more likely to shop across the Border or in the UK as a result, while 60 per cent said it would make no difference to their shopping habits.
If a referendum on EU membership were held in Ireland, 80 per cent would vote remain, 13 per cent leave with 7 per cent undecided.
Earlier this week, the Minister for Finance, Michael Noonan, said the Department of Finance's estimate was that growth next year could be around 3.4 per cent, compared to an estimate of 3.9 per cent made in the department's recently-published Summer statement. He said that this would not affect the room for Budget measures, estimated to be around €1 billion.
More sharply
However Cantor has cut its 2017 GDP growth prediction much more sharply, from 3.8 per cent previously - similar to the official views - to 2.4 per cent. It believes there will be a limited impact on consumer spending this year, but that the full impact on the economy is likely to be felt in 2017.
“Strong growth over the last two years has created significant buffer room for Ireland to help withstand this external shock,” according to Cantor. Healthy cash balances and ECB support for the EU bond markets provide Ireland with leeway.
However Cantor says that while Brexit may have a limited impact on growth in 2016, the hit will be more “material” next year, leading to its sharp growth downgrade. It expects growth to slow further to 2.2 per cent in 2018. Cantor says that the Irish public finances will continue to improve, but at a slower pace. It expects the debt-to-GDP ratio in 2017 to be 85.6 per cent, compared to the previous forecast of 82.7 per cent.
Despite strong gains in Irish bond prices in recent days, the broker say it remains nervous of the outlook for European sovereign bond markets, given the uncertainty created by Brexit.
