john hurley : economic developments in ireland and other issues opening statement by mr john hurley, governor of the central bank and financial services authority of ireland, at the presentation of the annual report 2002, dublin, 23 june 2003. * * * the international context for the irish economy has been difficult for some time. the expected pick - up in economic growth internationally has failed to materialise, primarily due to a series of adverse shocks. growth in the us, though weak, is still better than that of the euro area where economic performance has been disappointing. it would now appear that the euro area recovery will not begin to gather pace until early 2004. against this background, it is not surprising that economic growth in ireland has decelerated sharply over the past few years. real gnp growth last year was only 0. 6 per cent. our forecast at this point for the irish economy this year is for gnp growth of about 1½ percent ( gdp 2¾ per cent ). this represents a small downward revision of the gnp forecast of 1¾ per cent ( gdp 3¾ per cent ) in the spring bulletin ; the revision reflects the postponement of a global recovery. our gnp forecast is an improvement on last year, but it is still well below potential growth. on balance, the economy has been performing as well as can be expected in this difficult global environment and after a period of domestic overheating. while growth was modest last year, nonetheless, the economy has retained the substantial gains in living standards and employment achieved since 1994. between 1994 and 2001, gnp and employment growth averaged 8 per cent and 5 per cent a year, respectively. to date, the irish economy has proved to be fairly resilient in the face of the weaker international economy. there is now a greater degree of flexibility in the economy than in previous years and this is essential in a less benign economic environment. even though the economy has, to date, performed relatively well, there are a number of significant risks to the resumption of trend growth. apart from the weak international economy, there are issues of deteriorating competitiveness driven by domestic inflation and a rapidly appreciating euro ; since the start of 2002 the euro has appreciated by 32 per cent and 14 per cent against the us dollar and sterling, respectively. the threats to competitiveness have become more stark, with the irish price level currently estimated to be some 12 per cent higher than that of the euro area as a whole. although our inflation

addition to insights on the rental market, housing supply and unsecured lending. in addition, the review will encompass the utilisation of allowances which operate as part of the mortgage regulations. the review will also be informed by a public call for evidence on the impact of the measures. this call for evidence will be detailed at the launch of the central bank ’ s macro - financial review on 14 june. the call for evidence will remain open from 15 june to 10 august. in the years ahead, much attention will be paid to enhancing knowledge on the impact and effectiveness of macroprudential policies, and on strengthening macroprudential frameworks. i hope that the analytical work undertaken at the central bank of ireland can contribute to the development of ideas and methodologies in this area. we acknowledge that our measures impact individuals ’ ability to access credit and purchase houses. however, these policies are designed to enhance household and banking sector resilience and protect the system as a whole. and in this context, we must take a medium to long term view. in time, i believe history will look favourably upon these policies. let me finish by thanking you once again for the opportunity to speak to you today and i hope you have a stimulating conference. thank you. as emphasised in “ a macroprudential policy framework for ireland ”, central bank of ireland, 2014. bis central bankers ’ speeches