The list of downside risks includes: an unexpected tightening in international financial conditions or a downgrading of future global growth prospects, relative to the benign environment that has been in place for the last number of years; shifts in international trade and tax regimes that fundamentally challenge the Irish economic model; disorderly Brexit scenarios; and domestic policy errors that add to procyclical dynamics in the economy.
The first was during the 1970s, when we were hit by a rapid slowdown in productivity growth and by the effects of the oil crisis. Policy-makers in Canada used macroeconomic and microeconomic policies to try to cushion the economy from the impact of those events. As a result, our adjustment was slower and more painful than it needed to be.