NI economic growth rate 'needs to double' for unification

The average growth rate of the Northern Ireland economy would have to more than double to make Irish unification economically sustainable, a new report suggests.

The analysis has been produced as part of "blueprint" on Irish unity published by Fine Gael, one of the main governing parties in the Republic of Ireland.

Prof Stephen Kinsella, an economist, said the additional growth would be needed to generate the tax revenues to cover the costs of transition to a unified state.

"A plan for reunification has to start as a plan for faster growth in Northern Ireland," he said.

He added that the necessary big jump in growth was "a high bar to meet, but it is possible."

Kinsella said Northern Ireland's annual economic growth rate has averaged about 1.3% a year since the early 2000s.

Under a unification scenario of "managed integration" NI would need annual growth of about 3% to 4.7% to fund transition related borrowing over a 25 year period.

Managed integration is where public sector pay and social security benefits are gradually aligned, there is a significant increase in infrastructure spending and there are some dual public services while institutions are merged.

"Growth matters most of all because at 2% a year, no design repays its transition borrowing within 25 years," Kinsella added.

He suggests a range of growth-enhancing policies including infrastructure investments like wastewater, the electricity grid and transport.

He also points to improving skills, the productivity of local firms and research and development.

Northern Ireland's current devolved government has ambitions in these policy areas but has lacked the funding or political will to make major progress.

The Irish government has already made some funding available for cross-border infrastructure improvements such as the Narrow Water bridge.

Kinsella briefly considers the experience of German reunification, which is seen by some as having potential lessons for Ireland.

He looks at the influential work by the economists Michael Burda and Battista Severgnini which found that after an initial burst of growth east Germany failed to sustain its initial economic catch-up with the west.

However, Kinsella points out that more recent data shows "the long stall" through the 2000s eventually ended and convergence restarted.

"Convergence restarted after 2011, ran fastest from 2012 to 2019, was stopped by Covid, and has since slowed, especially outside Berlin," he added.

Kinsella said more work is needed to "sharpen" his conclusions such as an economic model of which households would gain and which would pay for unification.

"Whether reunification happens is a political and constitutional question that no fiscal model can or should answer," he concludes.

"If it does happen, the quality of the preparation will decide whether it strengthens both economies or strains them. That preparation can begin now, while the choices can still be made calmly and on the evidence."