Mr. Sebastian Barnes:

If we take the baseline scenario from the budget forecast, it shows aggregate consumption by all households, that is, the volume of stuff people consume, as basically flat from the end of this year through next year. It is not recessionary territory because it is not contracting; it is just at the limit of it. That is the impact of these higher energy prices. Eventually as people get used to it, as the prices come down a bit, we would expect the economy to recover. It will be a bad year next year. In the medium term, however, under those hypotheses, we would expect things to get better. One important thing is income will always be lower than it would have been had energy prices not increased because we are worse off. I hope energy prices will end up lower than they are today but they will be higher than they were before. There is a permanent loss of income there which, unfortunately, we must live with.

What I was trying to highlight in the opening statement was that there are risks that could be worse. That could be because the situation in Ukraine may become much more complicated, because the energy situation becomes much more complicated than we think or because the ECB tightening may end up either having bigger effects than we anticipate or that more tightening that we anticipate may be required.

There are many factors that could tip us into a much weaker economy. We would have to assess at that point what the appropriate response would be. There are so many scenarios, it is hard to know. The scenario that we currently have, based on these reasonable forecast assumptions, is that next year will be bad. People's real incomes will suffer. In terms of real wages, it will take us back to somewhere like 2019 levels, so it is a setback, but for many people before that they were experiencing growing real wages. Ireland is in a better position than countries where real wages have not gone up for a long time. Obviously, that is not true of everyone in the country, but it is true on average. It is a difficult scenario, and it is a consequence of Russia's war on Ukraine.