Dr. Conor O'Toole:

Coming into 2020, our expectation was for quite a rapid recovery in the domestic economy, particularly as the public health requirements were stood down over time. The outturn of the abatement of the public health restrictions would lead us to assume that this rapid recovery will happen in the domestic economy. Our expectation was that the expenditure we expected to happen this year would go into the types of activities households were unable to do during the pandemic. For example, the expectation was that it would be targeted towards entertainment, recreation, hospitality and accommodation. We expected that these really hard-hit sectors, which required public interaction, would see a recovery.

Notwithstanding the geopolitical tensions, if the recovery does materialise in those sectors, there may also be capacity constraints in getting the labour in there, particularly in the short run. These are sectors where people may have been laid off for long periods during the public health restrictions and who may have taken up other employment. A number of frictions may have caused the traditional labour pool for those sectors to have moved away a little. The construction sector certainly is a key issue but there may be other domestic non-traded sectors in which, if the demand comes back following the easing of restrictions, there could be bottlenecks.