This resilience reflects, in part, the flexibility of three key prices: the exchange rate, the price of money (or interest rates), and the price of labour. The effect of the exchange rate depreciation is evident in the improved conditions and prospects for a number of industries, including tourism, education, agriculture and parts of manufacturing.
Mark Carney refers to this as “the tragedy of the horizon”.11 The public sector can lead the way with this transition. Expenditure and tax policies could help catalyse private investment for the climate transition and promote behavioural change needed to meet climate targets. Indeed, this is one of the primary objectives of the Next Generation EU financial package.