john hurley : recent economic developments in ireland and the outlook for the economy opening statement by mr john hurley, governor of the central bank and financial services authority of ireland, at the presentation of the annual report 2007, dublin, 10 july 2008. * * * you are all very welcome to this press briefing to mark the publication of the annual report of the central bank and financial services authority of ireland. i will briefly introduce my colleagues who join me today. tony grimes, our director general, deputy director general brian halpin, and tom o ’ connell, assistant director general, economics. the annual report describes in detail our activities in 2007, which proved to be a challenging year for the bank, both in terms of our domestic and our euro area responsibilities. in my statement today, i will begin by reviewing current developments in the irish economy. we have seen a substantial adjustment in the domestic housing market, international financial market turbulence and, more recently, the effects of higher oil and food prices. this has led to a greater - than - anticipated slowdown in growth and higher - than - expected inflation. notwithstanding the challenging short - term outlook, we continue to believe that the mediumterm outlook is favourable and that growth should gradually recover and inflation moderate. however, such an outcome is not guaranteed and will require concerted action. current developments in the irish economy the latest cso national accounts data, which were released after the annual report was finalised, indicate that growth in the domestic economy remained robust in 2007 with real gdp and gnp increasing by 6. 0 per cent and 4. 1 per cent respectively, in line with average output growth over the previous five years. while the performance of the irish economy was strong in 2007 as a whole, there was a significant moderation in growth as the year progressed. this slowdown has accelerated considerably this year. while the emergence of a slowdown in the economy was not unanticipated, the loss of momentum has been greater than expected this year. this has arisen from a sharper than expected adjustment in the housing sector alongside a deterioration in the international environment. growth prospects for the next 18 months or so are now significantly less favourable and we will be revising our forecasts to reflect this. overall, it seems likely that both gnp and gdp growth will remain positive this year, albeit significantly less than 1 per cent. although some improvement is in prospect, growth is likely to remain below potential in 2009 at about 2 per cent. the down

john hurley : recent economic developments in ireland and the outlook for the economy opening statement by mr john hurley, governor of the central bank and financial services authority of ireland, at the presentation of the annual report 2006, dublin, 11 july 2007. * * * you are all very welcome to this press briefing to mark the publication of the annual report of the central bank and financial services authority of ireland. i will briefly introduce my colleagues who join me today. liam barron, our director general, deputy director general brian halpin, director general designate, tony grimes, and maurice mcguire, head of economic analysis and research. as you know, liam barron is retiring as director general next month. at the outset today i would like to thank liam for his outstanding contribution to this organisation over a long and distinguished career, in particular as director general and as a member of the board. i would also like to take this opportunity to wish tony grimes all the very best in his new role. tony is well placed to bring this organisation forward and to meet the various challenges in the years ahead. the annual report describes in detail our activities in 2006, which proved to be another busy year for the bank, both in terms of our domestic and our euro area responsibilities. today we are also publishing our strategic plan for the coming three years. i should also mention that the annual financial stability report will be published in the autumn and that the financial regulator will publish its own annual report later this month. economic developments i will begin by reviewing economic developments in ireland over the past year or so, before moving on to discuss the outlook for the economy for this year and next. the latest cso national accounts data, which were released after the annual report was finalised, indicate that the economy performed very well last year with gnp growth of 6. 5 per cent and gdp growth of 5. 7 per cent. reflecting the strength of output growth, last year was another good year for employment. an expansion of almost 4½ per cent in the numbers employed brought total employment above the 2 million mark for the first time. the unemployment rate remained low, below 4½ per cent – essentially full employment conditions. the pace of expansion last year was, in fact, somewhat above the economy ’ s medium term potential and, partly as a result, there was an increase in inflation. the harmonised index of consumer prices, which is the most appropriate measure, rose by 2. 7 per cent compared with 2. 2 per cent the previous year.