DUBLIN (Reuters) - Ireland’s fast growing economy could suddenly contract if Britain crashes out of the European Union without a deal, a prospect that has become more likely, Prime Minister Leo Varadkar said on Wednesday.

FILE PHOTO: Ireland's Prime Minister (Taoiseach) and Defence Minister Leo Varadkar speaks during a news conference after the European Union leaders summit in Brussels, Belgium, June 21, 2019. REUTERS/Francois Lenoir

Ireland’s economy is considered the most vulnerable among remaining EU members to Brexit and prompted the government to set out two budget strategies for 2020 on Tuesday, including a no-deal Brexit scenario forecasting a potentially sharp return to budget deficit to absorb the shock.

In those forecasts, Ireland’s finance ministry reiterated its view that gross domestic product growth would fall to anywhere between zero and 1% in 2020 if Britain crashes out of the bloc later this year, rather than growing by the forecast 3.3 percent if its neighbour secures an orderly Brexit.

However, Varadkar warned in could be worse.

“In a no-deal hard Brexit - in which case we won’t have to worry about the economy over-heating - it will slow down rapidly, even contract,” he told an annual budgetary conference, adding that he would publish an updated no-deal contingency plan next month setting out further government actions to be taken.

A member of Ireland’s fiscal watchdog, Martina Lawless, concurred, telling the conference that the no-deal damage “could be worse even than the worse case scenario being put forward” as forecasters do not know where additional disruptions might hit.

Varadkar said a no-deal outcome would be particularly challenging for British-run Northern Ireland, whose border with EU-member Ireland and how it is managed in the future has proven the most contentious element of Britain’s planned exit.

Speaking separately, Ireland’s European Affairs Minister Helen McEntee reiterated that the contested emergency “backstop” solution to prevent the return of border checks cannot be arbitrarily time-limited and must remain in place “as long as it is necessary, and no longer.”

With Boris Johnson, the favourite to become British prime minister next month, advocating changing or abandoning the backstop, McEntee said it remained to be seen how a new prime minister will actually address the issue after the “bluster” of the Conservative Party leadership campaign.

Varadkar said he would also wait and see.

“I think we need to be conscious that there is a leadership contest under way. Very often rhetoric is used in campaigns, people campaign in poetry and they govern in prose so I’ll see what the new prime minister has to say once they take up office,” he said.