The Irish Times view on the latest Central Bank bulletin: Upheaval in the offing

The latest bulletin from the Central Bank illustrates clearly the difficulty of economic forecasting for Ireland, given the threat of a no-deal Brexit in October. If this happens, it could knock most of the growth out of the economy next year and cost 34,000 jobs, on the latest Central Bank estimates. If it doesn't, then the main concern may be whether further strong growth increases the risks of the economy overheating. As the bank's economists have said, forecasting in such unprecedented times involves a high level of uncertainty.

There is simply no way to predict precisely how a no-deal Brexit will play out and the extent of the hit to the economy. The Central Bank's forecasts are a bit more pessimistic than those drawn up by a joint project undertaken by the Department of Finance and the ESRI. But on either set of predictions, a no-deal Brexit promises considerable upheaval and cost, fewer jobs and it will move the exchequer finances into deficit.

Beyond the initial hit to growth, the longer-term uncertainty is also significant. It centres on whether the EU and UK might come back to the table to negotiate a trade deal, when they might reach an agreement and what it might look like. There may well be positives for Ireland too, notably in attracting some investment which might otherwise have gone to the UK, or serving markets previously supplied by British companies.

But the short term economic upheaval – North and South – in the wake of a chaotic no-deal Brexit should not be underestimated and could well have a wider impact on business and consumer confidence. As the Central Bank said, delays are likely at ports and airports and some sectors, notably the beef industry, could face immediate and damaging consequences if the UK proceeds to put tariffs on imports.

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In his Summer Economic Statement , Minister for Finance Paschal Donohoe indicated that the only way to deal with this uncertainty in the Budget for 2020 was to accept that a no-deal Brexit would change the arithmetic. Slower growth would lead to lower tax revenues and higher spending. Supporting exposed sectors would also cost the exchequer. This would mean an expected surplus of revenue over spending next year would turn into a deficit.

While the Government will wait until September now to make a decision, it should – barring some unexpected development in the meantime – underline that the Budget needs to be framed firmly with a no-deal outcome in mind. This is difficult – and as well as dealing with the short-term consequences will require careful management to retain confidence in the longer-term management of the public finances. But discussions about the budget need to move away from the normal haggling over who gets what to a more strategic outlook, focusing on maintaining as much as possible of the progress we have made during the recovery.