The Irish economy faces a significant negative hit from Britain’s decision to leave the European Union as barriers to trade damage traditional sectors, the International Monetary Fund said in a report.
Ireland, whose economy has been the best performing in the EU for the last three years, is widely considered the most vulnerable among the bloc’s 27 remaining members to Brexit due to its close trading links with its nearest neighbour.
“While the impact to date has been modest, the overall effects over the medium term are expected to be negative and significant,” the IMF said in an annual report on the Irish economy.
“Risks are most acute for traditional sectors that depend on trade with the UK, with potentially sizable consequences for activity and employment outside of the main urban centres.”
The report also said that as one of Europe’s most open economies with one of its lowest corporate tax rates, Ireland faces uncertainty due to planned tax reforms in the United States and European Union.
The country should continue efforts to broaden its tax base, it said.
The government should avoid using temporary revenue gains, such as a recent surge in taxes paid by U.S. technology multinationals to justify long-term tax cuts or spending increases, it said.