 afternoon everybody gives me great pleasure today to welcome Sharon Donnery of the Central Bank on a very auspicious day International Women's Day what could be more appropriate and a few housekeeping rules before I introduce Sharon and I would ask you if you have not done so ready to either switch your phones to silent but you are encouraged to tweet which is a new one actually on me and I should say that the initial address here which Sharon is about to give will be on the record however the Q&A afterwards as is usual in this house is under Chatham House rules and in case there's anybody out there who doesn't understand what that means it means that participants are free to use the information you'd lean during that Q&A but neither the identity nor the affiliation nor indeed the location may be revealed to any other person all right and and I come back to that in a moment after I perhaps do the rest introduction and in a way Sharon Donnery leads little introduction here because she has featured prominently in the media in Ireland for in recent times and so I will just content myself saying that she was appointed as deputy governor of the Central Bank in 2016 she is an ex officio member of the Central Bank Commission and the governor's alternate on the governing council of the European Central Bank ECB another organization which a number of Irish Central Bankers have been linked in recent times and Ms. Donnery also represents the Central Bank at the European Systemic Risk Board and was chair of the ECB Budget Committee appointed in December 2016 she'd been with the Central Bank since 1996 and worked as an economist in the monetary policy division and she has a BA in economics and politics and an MA in economics from University College Dublin. Sharon I would ask you to take podium and recalling the title of your speech which is a very interesting one is a tale of two tales risks and resilience in uncertain terms. Time, sorry. Thank you very much for the kind words of introduction Pat. I think I'll try not to tweet during my own speech so good afternoon everyone it's a real pleasure to address the Institute and lovely to be here with you today. So the ebbs and flows of countries economic and financial fortunes are not always predictable and in Ireland I think this is even less so. So while sometimes there are patterns or regularities for such events they're not always a perfect predictor of what's to come and uncertainty always accompanies the predictions and when Sheamus Heaney died in 2013 the Economist magazine published an obituary remembering him with the byline a shy soul and they noted that during his years studying to be a school teacher in the 1960s he had used the pen name pardon my latin now insertus meaning uncertain yet they said there is little that is hesitant in his poems. Now there are plenty people who may think there's no poetry in economics but economics I think like Anni Field can learn from the greats in others so a central theme of my remarks today is uncertainty. Put simply Ireland today faces considerable uncertainty. The Irish macro financial environment could change significantly over both the short and medium term and the EU leaving the UK leaving the EU is not the only risk. The international economic environment has also deteriorated yet the domestic economy is currently robust. So we find ourselves in the interesting position of assessing a potential slowdown in the external international environment the UK departing from the EU while also worrying about potential overheating from a domestic perspective and plotting a course through such an environment with the potential for a very wide range of future future outcomes is indeed challenging. And while we can say with certainty that we have greatly expanded and strengthened our toolkit to do with various risks I think it's important that we maintain a sense of humility about what we can forecast and more to the point what we can control. Yet like Heaney despite the uncertainty that we face we cannot be shy or hesitant or complacent in our words not least in our actions or our policies. So today I'd like to discuss the economic outlook both for Ireland and the international environment then I'll elaborate a little bit on some of the risks I think that Ireland faces and I will finish by giving you some thoughts on what policy can do when we are facing these very different risks. Now given that I have the opportunity to speak at the IEA today and the timeliness of my remarks following the announcement from yesterday's monetary policy measures I'll begin by just focusing very briefly on the euro area and the global economic outlook. So as Pat mentioned I'm the governor's alternate at the governing council and yesterday the governor and I returned from a meeting of the governing council of the ECB and I think a key concern of the council at that meeting was uncertainty. Specifically the persistence of uncertainties related to geopolitical factors and the threat of protectionism which appear to be leaving marks on economic sentiment and on account of this the risks surrounding euro area growth and its outlook are still tilted to the downside. Incoming data have continued to be weak in particular in the manufacturing sector reflecting the slowdown in external demand compounded by some country and some sector specific factors. The impact of these factors is turning out to be somewhat longer lasting which suggests that the near term growth outlook will be weaker than had previously been anticipated. This assessment is broadly reflected in the March 2019 ECB staff macroeconomic projections for the euro zone which foresee real annual GDP increasing by 1.1% in 2019, 1.6% in 2020 and 1.5% in 2021. But compared with the December 2018 euro system staff projections the outlook for real GDP growth has been revised substantially down for 2019 and slightly down for 2020. Turning to Ireland our trade and financial openness is a fundamental structural characteristic of our economy. This is most evident from the familiar multinational brand's headquartered here and as we all know the Irish economy is highly integrated with the international economy both in terms of trade and with global financial markets particularly regarding cross-border capital flows. Over recent decades we've benefited very positively from developments in the global economy and the move towards high value, low volume trade and this has provided many benefits in terms of both revenue and employment. So for example multinationals are estimated to account for about 22% of total employment now. However this also means that structural shocks emanating from abroad can have an important bearing on the performance of our economy. These can include changes in global trade or international taxation regimes and indeed the structure of our economy means that it can even be affected by idiosyncratic shocks facing an individual sector or firm which is operating here. So while providing many positives this openness also increases the propensity and sensitivity of the Irish economy to global shocks be they structural ones like those I just described or cyclical ones driven by the global economic cycle or by developments in global financing conditions. This is evident in the data and the Irish macro financial environment has been more volatile than its European peers in the past. If you look at cross-country volatility of a range of macro financial variables since the 1980s including house prices, GDP, household income, employment and credit for example they all illustrate this. So in summary there are big benefits for Ireland being a highly globalised economy but those benefits also bring risks and those risks need to be managed appropriately. So turning to home a range of the indicators that we monitor and analyse show that the economy grew robustly in 2018. The strength of activity has been supported by strong growth and employment and that in turn has stimulated incomes and supported consumer spending. We've also seen an acceleration of investment in the economy for example particularly in building and construction. Taking a slightly longer term perspective the strong recovery since 2013 has yielded several important benefits. One of the most clearly tangible places where we can see this is in the number of people at work. So nearly 420,000 additional people have found employment since the low point which we experienced in 2012 and nearly 2.3 million people are currently in employment exceeding the peak of 2007. Crucially growth in employment has been broad based across different sectors of the economy so for example construction employment which accounted for one in nine jobs in 2007 today makes up just one in 16 and the improvement in labour market conditions has also been felt across different regions. We've also seen the overall size of the labour force grow so more people, particularly older people, are participating in the workforce and net inward migration has also resumed. So in the year to April 2018 it amounted to 34,000 people which is equivalent to 1.4% of the labour force. I think these are clear signals of the strength of domestic economic activity. Now looking ahead the bank's central forecast assumed that the UK Parliament will ratify a withdrawal agreement and that a transition period will come into effect until the end of 2020. So based on this key assumption the outlook for the Irish economy over the coming years remains broadly positive. However we do expect that a tightening of conditions in the labour market and bottlenecks in the housing market will contribute to a moderation in growth and that moderation also reflects the less favourable international economic environment I discussed earlier with the prospects for growth in our main trading partners less than previously anticipated. So in the bank's most recent published forecast we now expect GDP growth this year of 4.4% and a more moderate 3.6% next year. Underline domestic demand which is a measure that gives a more accurate picture of economic activity is forecast at 4.1% this year, moderating to 3.3% in 2020. We also expect further growth in employment in 2019 and 2020 of the order of 2.2% this year and 1.7% next. So given these forecasts for labour force growth it implies that the unemployment rate will drop to around 4.9% this year and 4.7% next year. So I'd say overall our central forecasts indicate that the current economic prospects for the economy are quite robust. Risks however are prevalent from both inside and out. However it's important that we're not complacent either in thinking that the UK's departure from the EU is the only risk to the economic outlook. The international outlook is uncertain and should we avoid a disorderly UK exit and the dent to Irish economic growth that would come with it a continued fast growing economy is only desirable as long as that growth is sustainable. Events could result in outcomes which are well beyond what we expect from our current central forecasts. In current circumstances much of that uncertainty arises from the lack of clarity regarding our future relationship with the UK and from the spectrum of potential outcomes a no-deal disorderly departure clearly represents a worst case scenario for us. The abrupt ending of cooperation agreements would have a material and immediate economic effect. In our latest quarterly bulletin for example using our economic modeling tools we assessed the possible macroeconomic implications of a sudden disorderly Brexit. Now given the unprecedented nature of such a no-deal scenario quantification is in itself highly uncertain and the exercise represents more of a scenario analysis than a forecast but it considers what could happen under certain assumptions though not necessarily what is most likely to happen. With a disorderly departure significant additional frictions and costs would arise and these results not just from the introduction of new trading arrangements but also for the breakdown of some arrangements that make cross-border trade possible. So for example issues we've heard debated publicly around regulatory and customs issues, border infrastructure issues and of course legal uncertainties and people are likely to feel this in their everyday lives. There would likely be immediate damaging consequences for trade and for supply chains for production, distribution and retailing. Now models and forecasting tools can be used to estimate the impact of long-run changes to trade arrangements however they're a lot less suited to predicting the short-run effects and the potential disruption that would arise from a breakdown in those arrangements. The scale of disruption would also be influenced by the ability of firms and retailers to respond and adjust and policy responses or mitigating actions would also help to ameliorate the situation. Nevertheless it's clear that a no deal scenario would have very severe and immediate disruptive effects and would permeate all areas of economic activity. Certain sectors as we've discussed before would be disproportionately affected particularly agriculture and food and border regions for example would also be heavily affected. So we calculate that a disorderly Brexit could reduce growth in the Irish economy by four percentage points in the first year albeit that as I said this figure itself is subject to much uncertainty. However as a result of domestic demand and the strong non-UK multinational sector our assessment is that there would still be some positive growth and output over the coming years even under a no deal scenario. This would be materially lower than the central forecasts I outlined earlier and will be closer to around one percent growth in both years. Now a fast growing economy is desirable as long as that growth is sustainable. However sometimes the economy can also grow too fast and overheat and this happens when an economy reaches the limits of its capacity to meet demand from individuals firms and the government. And one element of this concept is full employment which occurs when almost everyone who wants to work has a job. So when this happens there's very little available slack so in other words the amount of unused resources or spare capacity in the economy becomes very limited or non-existent. Of course one of the key problems with overheating is that it tends to result in a harmful downturn. Temporary surges create dynamics that are difficult to reverse. So for example wages wages can rise quickly to unsustainable levels. Overheating can also make households and firms overly optimistic about their future income prospects and lead them to take on too much debt. So that if this future income fails to materialize readjusting to a sustainable growth path can be painful. And the result can be bankruptcies, job losses, wage reductions and cuts to public services. Now as I mentioned earlier our central forecast suggests some moderation in growth over the coming years. However despite this we still see labour market conditions tightening further. Surveying a range of indicators reveals mixed evidence as to the extent of current overheating pressures. Investment in the real economy remains well below its previous peak. Overall credit growth is subdued as households continue to reduce their debts. The modified current account of the balance of payments an important indicator of imbalances recorded a small surplus in the most recent data. So while these measures are not indicative of significant overheating pressures currently past episodes demonstrate that the position can change very quickly. As the economy moves closer to full employment there is a need to guard against the risk that economic conditions give rise to overheating dynamics. Now to date the tightening of the labour market has not been accompanied by significant evidence of strong wage or price pressures. However further increases in aggregate demand may lead to an overheating economy. So we find ourselves in the interesting position of considering a potential slowdown in the international environment and the UK leaving the EU. And at the same time also worrying about potential overheating from a domestic perspective. The potential for a wide range of future outcomes and the associated uncertainty is indeed challenging. And to guard against these risks we need to build resilience. Resilience in households, resilience in businesses, resilience in the public finances and resilience in the financial system. This is important to withstand future downturns and if buffers are built up during the good times then policy can react during a downturn. So counter cyclical policy therefore offers a way to moderate the effects of downturns supporting demand in the economy when it's necessary. However the ability to implement that counter cyclical policy relies crucially on taking advantage of positive growth periods to build up those buffers. So given our continued strong growth right now reducing Ireland's high debt to safer levels for example should remain a priority both in order to protect the public finances in the face of those risks and also to lay the foundations for sustainable future growth. Ireland's debt to GNI star ratio remains elevated and above 100 percent and reducing that debt burden is vital to future proofing the economy to weather possible shocks. The unpredictability of corporate tax revenues in recent years also points to the danger of relying on what might prove to be partly transit resurgent revenues to fund lasting spending commitments. In recent years the public finances have benefited from an exceptional growth in corporation tax revenue and they've also benefited from savings on national debt interest payments due to the low interest rate environment internationally. Since 2015 revenue from corporation tax for example has consistently outperformed the Department of Finance's forecasts by average of about 1.4 billion per annum. Saving rather than spending such windfalls would help to mitigate against potential overheating and allow the build up of buffers which can be used in the event of future downturns. So just as fiscal buffers can be used to absorb shocks to the economy the financial system itself also needs to have such buffers because without these the financial system may react in a way that also deepens the economic stress faced by households and firms in a downturn by curtailing the supply of credit for example. Indeed the cost to the financial system of having insufficient buffers to absorb shocks became painfully obvious during the crisis. Now the central bank's mission is to serve the public interest by safeguarding monetary and financial stability and by working to ensure the financial system operates in the best interests of consumers and the wider economy and an essential outcome of our mission is strengthening the resilience of the financial system and in fact it is one of our five strategic priorities set out in our new recently published strategic plan. Our aim is to ensure that we at the central bank can and do play our part in strengthening the resilience of the system as a whole building on what has already been achieved since the financial crisis. So what has changed for the domestically relevant banking system since the crisis in terms of its resilience to deal with negative shocks? I think at a headline level three things come to mind. First its capital position relative to risk weighted assets has improved almost threefold relative to 2007. Reliance on short term wholesale funding from international capital markets has reduced such that the share of customer deposit funding has increased from less than half to around four-fifths and funding costs have fallen and despite recent market volatility have remained contained which suggests that counterparty's view of the creditworthiness of Irish banks has not changed which I think in itself is a reflection of the resilience of the core of the banking system. And then what of the role of policy generally and the central bank in particular to promoting resilience and safeguarding stability? Changes in the international regulatory and supervisory architecture have played a part in restoring confidence and promoting resilience in the system and we've also done much work in preparing the financial system for the UK's departure from the EU. I spoke on Tuesday to central bank colleagues at an internal event who were visiting the bank and I highlighted there some of the contingency planning we have undertaken in the context of the UK's departure. In particular I explained how the Irish market is unique in the area of security settlement so as many of you may know in simple terms when shares in a stock or other securities like government bonds and so on are bought and sold they're settled at a central securities depository or CSD. Security settlements provide the institutional and technical infrastructure that allows that to happen. Now due to the fact that Ireland has no domestic infrastructure here we utilise a number of settlement systems located across Europe but following the UK's departure from the EU the current arrangement will not be sustainable. So the bank in conjunction with the Department of Finance has engaged extensively with European counterparts to mitigate the potential disruption from this immediate cliff edge risk and I'm happy to report the issue has been largely mitigated notably by the European Commission's decision to grant temporary equivalents to the UK's legal and supervisory arrangement for central security depositories until March 2021. The bank and the Department of Finance will continue to liaise with the relevant stakeholders to ensure that the new long-term solution to this issue is implemented on time. Now I'm happy to talk a bit more about Brexit in the Q&A but for the remainder of my remarks let me briefly pay attention to how our macro-predential framework aims at strengthening the resilience to withstand adverse macroeconomic shocks. Now as I mentioned earlier Ireland has a small open economy is exposed to risks from within but also from the external environment and it's vital that as a small highly globalised economy we're proactive in using our macro-predential policy to mitigate systemic risk and build resilience. So at the bank our macro-predential framework and toolkit builds resilience in the system against different types of risk factors and complements the firm specific resilience that's the focus of micro-predential regulation and supervision. So to date the bank has already activated a number of tools which to a greater or lesser extent aim to enhance the resilience of the system. The other systemically important institutions buffer or the so-called OC buffer looks to build additional resilience in the system for institutions whose failure would have a bigger impact on the economy and the financial system and this framework was introduced in Ireland in 2015 when two institutions were identified by the central bank as being systemically important with a buffer rate of 1.5 percent to be phased in between July 2019 and July 2021. Our latest review of this part of the framework has identified six Irish authorised institutions as other systemically important institutions. Promoting resilience for the banking sector is also the primary rationale underlying our policy stance for the counter cyclical capital buffer the CCYB which you may be aware we announced last year. Now we introduced this buffer because a number of indicators suggested a sustained trajectory towards a gradual build-up of cyclical systemic risk. Our aim is to mitigate against the negative reaction of bank lending to the real economy in any future downturn or period of stress and many of you already heard me talk previously about the bank's mortgage measures and in that case increasing bank and borrower resilience so they're more able to withstand the impact of negative shocks is a central objective of those measures. So each of the individual macro-predential policy interventions that we have taken have the objective of protecting financial stability by targeting different elements of systemic risks so the individual tools have different objectives they operate through different transmission channels and they look to address different sources of risk. I began my remarks by discussing how the economy is very integrated with the international economy both in terms of trade and global financial markets and by highlighting the vulnerability that this entails. It's important that banks hold structural as well as cyclical buffers to guard against the higher level of macroeconomic risk that Ireland faces. Having buffers means capital depletion does not lead to instability in financial markets and that in turn makes the tightening of credit conditions less likely. Resilience in the banking system should be locked in through the more active use of capital buffers and this is important I think particularly given the higher levels of risk intrinsic to small highly globalised economies. It also allows the system to withstand both unexpected negative developments and the ebb and flow of financing conditions. So to conclude I think the wide range of possible future paths means building resilience is not only desirable but necessary. Insurtey uncertainty will always be a feature of the system and therefore we need to be humble about the extent to which we can forecast and predict while being aggressive in building defences against potential risks. The government firms households and the financial sector participants should be cognisant of the range of potential outcomes and the risks contained therein. The central bank has particular powers and we will use them to safeguard monetary and financial stability and to ensure the system operates in the best interests of consumers and the wider economy. That is how we best serve the public interest. Thank you very much again for the invitation and for your time and I look forward to the questions and answers.