also medium - term challenges to be faced, most notably perhaps, the implications of population ageing. although occurring somewhat later in ireland than elsewhere, the impact is likely to be significant. some measures have already been taken, such as increasing the retirement age in the public sector and the setting up the national pension reserve fund to meet future public pension liabilities. in summary, the outlook for the domestic economy remains positive, if somewhat more uncertain. some slowdown in growth seems inevitable but its extent and duration will be affected both by developments in the international environment and our response to them. the risks have increased in recent times but if there is an appropriate response domestically and a continued focus on boosting productivity growth over the medium term, the prospects for continued growth and improvements in living standards remain good.

only moved up toward their pre - covid levels. in many foreign countries, growth moderated at the end of 2020, as a spike in covid hospitalizations and deaths led to tighter public health restrictions in many economies. retail sales and measures of services activity weakened even as manufacturing and exports remained more resilient. foreign activity should strengthen later this year as vaccinations rise, covid case counts decline, and social distancing eases. it should also be aided by some rundown in the stock of excess savings, continued fiscal and monetary support, and strong u. s. demand. the turnaround in growth in each country will hinge on success in controlling the virus and limiting economic scarring from the past year ’ s downturn, as well as on available policy space, and underlying macroeconomic vulnerabilities. outlook so, what do these developments suggest for the u. s. outlook? increasing vaccinations, along with enacted and expected fiscal measures and accommodative monetary policy, point to a strong modal outlook for 2021, although considerable uncertainty remains. it is widely expected that we will continue to make progress controlling the virus, reducing the need for social distancing, but variants of the virus, slow take - up of vaccinations, or both could slow progress. additional fiscal support is likely to provide a significant boost to spending when vaccinations are sufficiently widespread to support a full reopening of in - person services. various measures of financial conditions are broadly accommodative relative to historical levels and should remain so. the labor market should strengthen, perhaps significantly, as the virus recedes, social distancing comes to an end, and the service sector springs back to life. inflation is likely to temporarily rise above 2 percent on a 12 - month basis when the low march and april price readings from last year fall out of our preferred 12 - month pce measure. transitory inflationary pressures are possible if there is a surge of demand that outstrips supply in certain sectors when the economy opens up fully. the size of such a surge in demand will depend in part on the effects of additional fiscal stimulus, along with any spend - down of accumulated savings, which are uncertain. 8 but a surge in demand and any inflationary bottlenecks would likely be transitory, as fiscal tailwinds to growth early this year are likely to transition to headwinds sometime thereafter. a burst of