Ireland, Malta, Belgium, the Netherlands, Cyprus and Luxembourg are the most exposed countries to Brexit, according to Fitch Ratings. But Ireland, where total goods and services exports to the UK equal 17% of the country’s GDP, will probably suffer the most.
The UK vote to leave the European Union is raising risks to Ireland’s growth and creating uncertainty around future relations with Northern Ireland. While Fitch Ratings ruled out any “immediate implications” for Ireland’s sovereign rating in the near term, a medium-term rating impact would be possible “if the economic dislocation of Brexit were to prove severe”.
As reported by The Irish Times, a UK slowdown, sterling depreciation and potential future trade barriers between Ireland and the UK would weigh on Irish exports, economic growth and employment.
Lower economic growth would reduce the tax intake, reducing the medium-term fiscal space that the government identified in its recent Summer Economic Statement.
What is more, a downturn in UK real estate prices is a risk for Bank of Ireland, according to Fitch since UK loans (largely retail mortgages and commercial real estate loans) account for 44% of its overall loan portfolio
In related news, the Guardian quoted Ireland’s Finance Minister Michael Noonan as saying the government was hopeful that the impact of Britain’s decision would be limited.
“We’re quietly hopeful we won’t get a major shock from the settlement,” he said. “If there are adverse consequences for Ireland, and there well may be, it’s medium term, but the extent of them will depend on what kind of settlement succeeds British membership and how the negotiations between the UK and EU progress.”