Fiscal buffers should be accumulated – Lane

The pre-Budget letter from the Governor of the Central Bank of Ireland Philip R. Lane to the Minister for Finance, Paschal Donohue TD was published on 5 September 2018.

The annual letter outlines the Central Bank’s views of the domestic and international macroeconomic environment and the financial system in order to inform budgetary policy and fiscal strategy.

Governor Lane noted that the European economic recovery was expected to continue at a moderate pace, while near and medium-term projections for the Irish economy are for “significant expansion”.

However he highlighted that risks to both European and Irish growth remain “clearly tilted to the downside” due to ongoing high public and private sector debt levels, the possibility of international shocks as well as Brexit-related vulnerabilities.

Governor Lane emphasised in his letter the importance of accumulating fiscal buffers in order to limit the impact of a future downturn.

"If fiscal buffers are not built up in good times, there is a risk of repeating the costly experience of past episodes by which economic downturns were amplified by pro-cyclical fiscal austerity," he wrote.

The publication of the Governor’s pre-Budget letter coincides with an economics roundtable event held at the Central Bank’s Dockland Campus.

The event brings together economists, journalists and other stakeholders to discuss economic issue and challenges facing Ireland in the near-to-medium term.

At the event, Governor Lane delivered a speech titled “Macro-Financial Risk Management” in which he further discussed current issues relating to fiscal and macro-prudential policy.