Dr. Tom McDonnell:

The first question was on the distorted GDP figures. It is extremely frustrating having to forecast these things. Many of the tools available to us are not really useable now. I think it will be difficult for the Central Bank and the Central Statistics Office to come up with an alternative metric that will be accepted internationally. I think no such broadly based figure exists to capture perfectly the activity in the domestic economy, which is what people are really thinking about.

The corporate restructuring in 2015 polluted the data to such an extent that it is of arguable value anymore. I agree with the Central Back in that it was a level effect. My baseline assumption is that we will go back to having reasonably normal growth levels from now on, albeit from that higher base, but I cannot guarantee that. There may be more corporate restructuring in 2016 and beyond related to tax planning.

I do not believe that Ireland trying to peddle an alternative metric internationally would fly particularly. If we were to use the figures based on domestic demand, it would be highly problematic because net exports are such a sizeable part of the Irish economy. I understand the motivation to remove intangibles, the intellectual property assets and aircraft. One reason I sympathise with this approach is that, historically, in an advanced economy we would consider an investment ratio of between 20% and 22% as being pretty standard. We have been well below that for a long time now. If we exclude intangibles, aircraft intangibles and so on, investment was approximately €31 billion in 2015, which is a small proportion of the economy. I would be keen to have some kind of metric which would allow us to have investment appropriately as a proportion of economic output. Clearly, we have an investment problem in the economy at the moment. It is probably one of the reasons we are not overheating, as it happens. Obviously, we have a major problem in terms of public capital investment, which is at extremely low levels. It is barely more than depreciation. We have low levels of private sector investment as well.

I do not believe the Central Bank and the CSO will succeed.

I do not believe they will come up with a better figure. I think in the end they will come up with a dashboard of measures which will include GDP, GNP, underlying investment and so on and employment, which will attempt to create a picture of how healthy the economy is and allow people like me and those in the Central Bank to try to determine the structural position of the economy. That is important for fiscal policy and so on and indeed for the Central Bank's macro-prudential rules.

In terms of the 60% target, those figures are not particularly scientific. They are ceilings but they are fairly arbitrary ceilings. Provided Ireland adheres to the structural balance rule, the expenditure benchmark rule and, in 2019, the debt brake rule, it will be doing more than enough in terms of how far it goes in adhering to fiscal rules. It is quite likely that the debt-to-GDP ratio will fall to around 60% by the end of the decade unless there is a negative shock to the economy. The cost of borrowing at the moment is quite low. There is still scope for the National Treasury Management Agency, NTMA, to re-profile the debt in order that it is all at a very low interest rate, which means the debt servicing costs will be very low. It is the debt servicing cost, rather than the debt, that really matters over the long term.

Going further than 60% reduces our ability to do everything in terms of fiscal policy. It means that the fiscal stance will be tighter over future years if we aim for lower targets. I do not think the debt rule will be particularly onerous for Ireland in the future but adherence to the expenditure benchmark rule shows Ireland’s commitment to fiscal prudence and I do not see the need to go any further than that. I think Ireland’s debt-to-GDP ratio will probably go below 60% anyway.