Financial Stability Review 2024 II

Transcript of the video "Risks and Outlook for the Financial System (December 2024) (PDF 68.5KB)"

The global financial system has remained resilient since the last Review despite periods of market volatility, but risks are to the downside amid heightened economic and geopolitical uncertainty. Global inflation has continued to fall and is close to target for many advanced economies, allowing central banks to begin cutting policy rates. While global growth forecasts have been stable, indicators of activity in the euro area have weakened, and financial markets have at times responded strongly to economic news. This suggests the balance of risks has shifted from inflation to growth, and intensified geopolitical tensions raise the prospect of lower trade and GDP growth.

Growth in the Irish domestic economy has been robust, and this is expected to continue over the near-to-medium term, supporting the financial position of borrowers and lenders. But Ireland is particularly exposed to heightened geo-political and economic risks as a small, open economy. Medium-term domestic risks have increased on balance, with capacity constraints and housing shortages posing risks to growth and future FDI. An expansionary fiscal stance coupled with an expectation of easing monetary policy could aggravate existing imbalances and contribute to overheating in the economy. Households and businesses remain resilient, but are also exposed to global developments through trade exposures and high concentration of MNE employment in some sectors. The domestic CRE market continues to adjust, as both structural and cyclical headwinds persist, but the domestic banking system remains resilient in the face of this CRE downturn.

See also:

• Previous Financial Stability Reviews
• Press Release on Financial Stability Review
• Read Governor Makhlouf's full opening remarks
• FSR 2024 II Presentation