Dr. Kieran McQuinn:

There are a number of different areas. As we suggested in our opening statement, a situation like this initially brings a large degree of uncertainty, and uncertainty is bad for business decisions on investments and consumption decisions by households. It has an adverse impact on global trade in a myriad of fashions. All the major drivers of growth that we can envisage are impacted across western economies. We are a small open economy. Typically, there is a 1:1 relationship between Irish economic activity and global economic activity. If global economic activity falls by 1 percentage point, Irish economic activity tends to fall by 1 percentage point.

That is the overall uncertainty effect, but then there are cost-of-living issues. Energy costs have increased sharply. Much will depend on the scale and duration of the conflict; that will determine the point. In the short term, though, there will be significant increases in energy costs, commodity prices, grain prices and the prices for related agricultural products and inputs. We are looking at a substantial increase in the cost of living across the board. What its duration will be depends on the scale of the conflict.

This poses a challenge for the public finances, given that the measures the Government has introduced to deal with the inflationary issues come with a price tag. It may well be the case that more such interventions will be required in the months and, possibly, years ahead. Those will also have significant price tags. From the overall impact on economic activity to the impact on the cost of living and the public finances, there is a substantial effect.

Regarding the comparison between this situation and the pandemic, it is too early to say. We will have to wait to see how long it lasts. As I told Deputy Canney in response to pretty much the same question, the pandemic had an impact on the Irish economy, but the resilience of our economy enabled it to come through in quite a strong fashion. While there are sectors that are still suffering from its effects, the economy performed in a resilient fashion overall and the public finances were able to be returned to a sustainable path quickly. That puts us in a good position coming into this crisis, but the scale and duration of the crisis will depend on the scale and duration of the hostilities.