Mr. Ian Power:

I will take members through the main external assumption underpinning our macroeconomic projections. Let us turn to slide 3. As members will be aware, commodity prices have fallen significantly in the past year, in particular oil prices have fallen sharply, owing to a weak global demand and robust supply. To put it in perspective, oil prices excluding the very peak of the global downturn in early 2009, have suffered the largest year on year decline since 1986. Ireland as a net energy importer should benefit from this decline.

Let us now turn to slide 4. Currency developments are acting as another significant tailwind for the Irish economy, with the euro depreciating sharply against both the dollar and sterling in the past year. To put this in perspective, it is the largest year on year depreciation of the euro against the dollar and sterling since the inception of the single currency in 1999. Both these factors are acting as significant tailwinds for the Irish economy.

Let us now turn to slide 5. External demand remains reasonably solid with our main trading partners performing relatively well. The graph shows quarterly GDP growth rates for the US, the UK and the euro area, which collectively make up approximately two thirds of Ireland's exports. The US is performing well with steady job gains underpinning the consumption and recovery there. One can see a slight blip in the first quarter, which is mainly due to one-off factors such as labour disputes at west coast ports and the extreme weather conditions on the east coast. One can also see there was a resumption of robust GDP growth in the second quarter of this year of 1% relative to the previous quarter. The UK economy also continues to grow steadily with strong domestic demand and, importantly, the growth outlook in the euro area is picking up, perhaps not as fast as might be expected, given the tailwinds, but it is moving in the right direction.

Let us turn to slide 6. This slide summarises our external assumptions. Our external GDP growth assumptions come from the OECD's interim economic assessment. The main difference relative to the stability programme update, SPU, is the marked decline in the US GDP growth rate. Again, this is mainly due to the very weak key 1, which I touched on earlier. There has also been a pick-up in the growth outlook for the euro area for this year relative to the SPU. As required, we make the technical assumption that exchange rates are unchanged as of end September going forward. As a result our exchange rate assumptions are broadly in line with those at SPU.