Dr. Mark Cassidy:

There are greatest concerns in terms of the economy generally and then from a policy perspective. For the economy generally, clearly we are hoping for the scenario, that I think people now expect, whereby the vaccines get successfully rolled out during the second half of the year and are effective in combatting the virus. Anything where that does not materialise is the greatest short-term risk for the economy.

Over the longer term, and this is getting also into the policy dimension, there are a number of challenges for Government policy. First of all, one will see additional financial pressures for the Exchequer from ageing, particularly as and from 2040, and also in relation to climate change. There is a draft Bill today which will include intermediate or secondary targets for before 2050. There are many medium-term pressures in the public finances that need to be considered now. They would be difficult to deal with if they are not addressed now.

In addition, Ireland is a small, open economy. We are always more vulnerable to shocks to the external environment than other countries and that remains the case. I would note maybe two of those in particular. First, we have a high degree of reliance on corporation taxes paid by foreign multinationals. It is welcome that we receive these corporation taxes but there are risks to those because there is quite a high degree of concentration in a small number of sectors and small number of firms. There is also an international process under the OECD in terms of changes to international taxation arrangements and it is acknowledged that Ireland could lose some of its current tax revenues as a result of that process. Risks relating to the external environment, multinationals and SMEs are important.

I suppose a third concern is that while the public finances remain in a generally favourable position and they can absorb the additional expenditures that will be required this year and perhaps after to alleviate the current costs of the restrictions because of Covid but also to help the economy recover, we still have a high level of public sector debt and a high level of public sector debt leaves an economy more vulnerable to unforeseen shocks that might come down the line. For that reason more than any, a key element of our policy advice is when conditions allow - I emphasise that part because we are not currently in that state - it will be essential to return the public sector debt ratio to a lower, more sustainable level than the current level which is approximately 100% of national income. Economic growth will do most of the heavy lifting in that regard but at the same time there is a need to think about a path to return the Government balance to a more sustainable situation that is compatible with a lower debt ratio. Those are just some of the concerns that come to mind.