Ibec has sounded a warning note about the medium and long term effects of Brexit in its latest Quarterly Economic Outlook. 

The business and employers' group has predicted economic growth of 3.9% this year and 3.2% in 2017, down from its previous forecasts. 

Ibec said that strong economic momentum meant the economy as a whole looks set to weather the Brexit shock this year. But it cautioned that the outlook for 2017 is much more uncertain. 

It warned that the currency shock continued to heap pressure on exporters, while the regions were particularly vulnerable. 

Ibec's Director of Policy Fergal O'Brien said that the exporting industries most affected by the sterling fall are typically jobs intensive and deeply embedded in local economies. 

"This adds to the risk that some parts of the country will be disproportionately hit. Already regional employment performance is mixed. The West (Galway, Mayo, Roscommon) has experienced a considerable lag over the past four years compared to other parts of the country," he stated.

Mr O'Brien said that Budget 2017 must support industries where the immediate fall-out from Brexit is greatest. 

"Potential trade restrictions post Brexit and the more preferable tax treatment of SMEs in the UK raise the possibility of Irish SMEs servicing that market from within the UK itself, rather than by exporting from Ireland," he explained.

Ibec also said that Ireland needs to match the UK tax offering for indigenous businesses. "We must radically reform our entrepreneurs' capital gains tax, along with improving our incentives for investment and innovation," Mr O'Brien stated.

On the labour market, Ibec's latest economic outlook said that due to strong gains achieved in the first half of the year, it is expecting employment growth of 2.8% this year.

It also predicts that due to the improvements in the labour market, consumer spending is still expected to grow by 4.9% in 2016 despite weak numbers in the second quarter.