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National Risk Assessment 2019Overview of Strategic Risks

Prepared by the Department of the Taoiseachgov.ie

National Risk Assessment 2019Overview of Strategic Risks

gov.ie

National Risk Assessment – Overview of Strategic Risks 2019

Foreword

1. Introduction 2019 1.1. OverviewoftheNationalRiskAssessmentProcess1.2. TableofRisks20191.3. OverviewofStrategicRisks

2. Geopolitical Risks 2.1. DepartureoftheUKfromtheEU 2.2. InstabilityinNorthernIreland2.3. FuturedirectionandstabilityoftheEU2.4. Changingdistributionofglobalinfluenceandmoveawayfromarules-basedsystem2.5. Terroristincidentsandarmedconflicts

3. Economic Risks 3.0. Introduction 3.1. EconomicImpactofBrexit3.2. RiskofOverheating3.3. PublicExpenditurePressures3.4. GlobalSlowdown,includingchangestointernationaltradingenvironment3.5. Internationaltaxchanges3.6. Relianceonmultinationalcorporationsandsectoralconcentration

4. Social Risks 4.1. CapacityofHigherandFurtherEducationSystem4.2. SkilledLabourShortages4.3. AnAgeingPopulationincludingpensionsandhealthsystemchallenges4.4. ImpactofSocialMediaonPublicDebate4.5. SocialcohesionincludingPerceptionsofRuralandRegionalImbalances4.6. Migrationandintegration

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National Risk Assessment – Overview of Strategic Risks 2019

5. Environmental Risks

5.1. ClimateChange&Biodiversity5.2. Ensuringanaffordable,sustainableanddiverseenergysupply5.3. DeliveryofPublicInfrastructure5.4. Foodsafety5.5. SupplyandAffordabilityofHousing

6. Technological Risks 6.1. CyberSecurity6.2. Disruptivetechnologytrends6.3. Anti-MicrobialResistance6.4. MajorPandemics6.5. Nuclearcontamination

Annex1 GovernmentTaskForceonEmergencyPlanning– NationalRiskAssessmentforIreland2017Annex2 Ireland’sChangingDemographicsandrelatedrisksAnnex3 SnapshotofresultsfrompublicconsultationAnnex4 NationalRiskAssessmentPublicConsultation– groups/individualsthatmadeasubmissionAnnex5 NationalRiskAssessmentPublicConsultation– riskshighlightedbyrespondents

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National Risk Assessment – Overview of Strategic Risks 2019

Foreword

ThegreatAmericanpoet,MayaAngeloubelievedthatweshouldalwaysbe‘hopingforthebest,preparedfortheworst,andunsurprisedbyanythinginbetween’.TheNationalRiskAssessmentservesavitalfunctioninhelpingustodoexactlythat.

Asweknow,theeconomycontinuestoperformwell,butwearenotcomplacentortakingthatforgranted.Thenexttwelvemonthswillseeusfacechallengesofsignificantscaleandimpact,includingthoseemergingfromBrexitandClimateChange.Internationally,weseecontinuedtradetensionsandtheemergenceofaglobaleconomicslowdown.Domestically,wewanttocontinuetoensureourpublicfinancesarerobustandsustainable,sowecanrespondtotherisksidentifiedhere.Thescaleandpotentialimpactoftheserisksunderlineshowimportantitisthatweareawareofeverypossibleproblem,andtheNationalRiskAssessment:OverviewofStrategicRisksenablesustofacetheserisksheadon.

TheNationalRiskAssessmentensuresthatallvoicesareheardacrossthenation.Inthiswayweavoidrepeatingthemistakesofthepast,bytakingintoconsiderationtheconcernsandviewsofbusinesses,academicsandresearchers,civilsocietygroups,andmembersofthepublic,aswellasthepublicsector.Theultimategoalistoavoid“groupthink”whenitcomestorecognisinganddiscussingrisksatanearlystage.

Thisyear,Iamdelightedtoseeover650submissionsthroughthepublicconsultation,asubstantialincreaseonthenumberreceivedlastyear,andastrongendorsementofthevalueoftheNationalRiskAssessment.Inparticular,itwasnoteworthythatClimateChange&Biodiversityemergedasthemostimportantpriorityforrespondents.

AswepublishtheReportforthesixthyear,itisimportanttonotehowtherisksidentifiedhavedevelopedandevolved.Thereisaconstantlychangingriskbackdrop.Forexample,thisyearwehaveincludeda‘CapacityinHigherandFurtherEducationSystem’risk,aswellasdiscussingtherisksaroundperceivedruralandregionalimbalances.

Someriskshaveincreasedinsignificancesincelastyear’sreportincludingtheBrexitrisksinboththeGeopoliticalandEconomiccategories,‘ClimateChange&Biodiversity’and‘CyberSecurity’.Theserisksareongoingandevolving,andthechangesherereflectthis.Alloftherisksidentifiedaremonitoredtoensurewecanrespondeffectivelytoeverychallengethatarises.

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National Risk Assessment – Overview of Strategic Risks 2019

The2019NationalRiskAssessmentprovidesanimportantcontextforDepartmentsandAgenciestodevelopthenecessarymitigatingactions,asappropriate.So,itisrightthatwepromotediscussionandawarenessofthemostimportantstrategicrisksfacingIreland.Continuingtobevigilantoftherisksfacingourcountrywillhelpustomakebetter-informeddecisionsonhowtoprepareforthem.

Leo Varadkar Taoiseach

July 2019

1. Introduction 2019

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National Risk Assessment – Overview of Strategic Risks 2019

1.1. Overview of the National Risk Assessment Process 1.2. List of Risks 2019 1.3. Overview of Strategic Risks

1.1. Overview of the National Risk Assessment Process

TheNationalRiskAssessment(NRA)pro-videsanopportunityfortheidentification,discussionandconsiderationofrisksfacingIrelandovertheshort,mediumandlongterm.SincetheNRAwasfirstpublishedin2014,theannualReporthasservedasanimportantindicatorofnational-levelrisks,andhascalledattentiontovariousrisksthatsubsequentlybecamemajorissuesforIrishsociety,includingBrexit,andrisksaroundhousingsupply,andcybersecurity.

TheNationalRiskAssessmentplaysanimportantpartintheearlyidentificationofpotentiallysignificantrisksthatIrelandmayface.Itisvitaltolearnfromthemistakesofthepast,andthisexercisewasintroducedtoensurethatwe,asaGovernmentandasawidersociety,encourageandparticipateinthesenecessaryhorizon-scanningdiscus-sionstoensurethatweidentifyrisksearlyandcanrobustlyprepareforthem.Whilenotintendedtoreplicateordisplacethedetailedriskmanagementthatisalreadyconductedwithingovernmentdepartmentsandagencies,theNationalRiskAssessmentdoesaimtoprovideasystematicoverviewofstrategicrisksthatcanformanimport-ant,andinclusivepartoftheoverallprocessofriskmanagement.

DetailedriskmanagementbeingconductedseparatelytotheNationalRiskAssess-mentprocessincludestheworkoftheDepartmentofFinanceandtheCentral

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BankofIrelandwithrespecttofinancialandmacro-prudentialrisks;andtheworkoftheGovernmentTaskForce(GTF)onEmergencyPlanning,supportedbytheOfficeofEmergencyPlanning(OEP),whoproduceaNationalRiskAssessmentforIrelandcentredonrisksrelatingtopotentialcivilemergenciesatnationallevelwhichisconductedinthecontextoftheStrategicEmergencyManagementNationalStruc-turesandFrameworkapprovedbyGov-ernmentin2017andIreland’sreportingcommitmentsundertheEUCivilProtectionMechanism.Inaddition,aNationalSecurityAnalysisCentre(NSAC)isbeingestablishedbytheGovernmentaspartoftheimple-mentationofthereportoftheCommissionontheFutureofPolicinginIreland.TheNSACwillbringthevariousagenciesrele-vanttonationalsecuritytogethertopoolexpertiseandinformation,soastoproduceacomprehensivepictureofthethreatstotheStateanddevelopanintegratednation-alsecuritystrategy.

TheDepartmentsandagenciesinvolvedintheseriskmanagementexercisesalsofeedintothisNationalRiskAssessmentprocess,therebyensuringcoherenceandalignmentwithotherelementsoftheoverallriskman-agementapproach.

Separately,andinaccordancewithacom-mitmentmadebyGovernment,anUpdateoftheWhitePaperonDefence(2015)iscurrentlybeingfinalisedbytheDepartmentofDefence.Animportantstrandofthisisafullyupdatedassessmentofthesecurity

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National Risk Assessment – Overview of Strategic Risks 2019

Inthatcontext,thedraftNationalRiskAssessment2019waspublishedforpub-licconsultationinMayandlaidbeforetheHousesoftheOireachtas.Over650sub-missionswerereceivedaspartofthiscon-sultation,andtheseareoutlinedatAnnexes3and4.

Inparallelwiththisconsultation,workalsocontinuedwithingovernmentdepartmentstofurtherstrengthenthequalityofIreland’sriskgovernancemechanismsandtoensurethatappropriatemitigationframeworksareinplace.Asoutlinedabove,thisincludestheworkoftheGovernmentTaskForceonEmergencyPlanning,supportedbytheOfficeofEmergencyPlanning,theworkoftheDepartmentofFinanceandtheCentralBankofIrelandwithrespecttofinancialandmacro-prudentialrisks,thenewNSAC,andtheSteeringGrouprepresentinggov-ernmentdepartmentsandagencies,whichoverseespreparationoftheNRA.

ThefinallistofstrategicrisksforIrelandin2019isincludedonthefollowingpage.Therisksaregroupedacrossgeopolitical,economic,social,environmentalandtech-nologicalcategories,inlinewiththeWorldEconomicForum’sannual‘GlobalRisksReport’1.ThisNationalRiskAssessment2019,therefore,istheresultofextensiveconsultationandengagement,includingasignificantpublicconsultationelementwithover650responses,anditsetsoutabroadviewofthehigh-levelstrategicrisksfacingthecountrytoday.

1WorldEconomicForum,GlobalRisksReport2019availableat:https://www.weforum.org/reports/the-global-risks-report-2019

environmentcarriedoutbyaninter-depart-mental/inter-agencygroup.WhenapprovedbyGovernment,theupdatewillincludeanoutlineofdevelopmentsinimportantas-pectsofthesecurityenvironmentsincethepublicationoftheWhitePaperonDefencein2015.

TheDepartmentsandagenciesinvolvedintheseriskmanagementexercisesalsofeedintothisNationalRiskAssessmentprocess,therebyensuringcoherenceandalignmentwithotherelementsoftheoverallriskman-agementapproach.

AbroadanddiverserangeofcontributionstotheNationalRiskAssessmentareencour-agedthroughseverallayersofdebateandengagement,toensureweavoidthepos-sibilityof‘groupthink’.AttheinitialstageoftheNationalRiskAssessmentprocess,aSteeringGroup,chairedbytheDepartmentoftheTaoiseachandcomprisingrepresenta-tivesfromallGovernmentDepartmentsandagencies,workedtogethertodrawupaninitialdraftlistofrisks,asinpreviousyears.

Asmentionedabove,oneoftheoriginalimpetusesbehindtheNationalRiskAssess-mentprocesswastoavoidthepossibilityof‘groupthink’whenidentifyingstrategicriskstothecountry.Tothisend,eachiterationoftheNRAhasinvolvedanopenpublicconsultationtogaugewhetherthereareanysignificantrisksthathavebeenoverlookedorunderplayed,andtoensureinclusiveengagementfromallcornersofsociety.Forthisexercisetoberobust,comprehensiveandinclusive,itisimportantthatallvoices–includingdiscordantorminorityones–areheard.Amorerigorousandwide-rangingdebatewillbolsterourabilitytoidentifyandquantifytheriskswefaceandourabilitytomaketherightchoicesforthefuture.

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National Risk Assessment – Overview of Strategic Risks 20191.2. List of Risks 2019

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1.3. Overview of Strategic Risks

WhilemanyoftheStrategicRisksdiscussedinthe2018NationalRiskAssessmentcon-tinuetoberelevantfor2019,thecontextandpressuresaroundseveralofthemhaveshiftedandevolvedintheinterimperiod.

Forexample,wehaveseentheuncertain-tiesaroundtheformBrexitwilltakepersistandindeedincreaseoverrecentmonths,bringingwithitastrongerfocusonthepotentialriskofano-dealBrexitandtheimpactsuchanoutcomecouldhaveontheIrisheconomyandonstabilityinNorthernIreland,aswellaswiderimplicationsacrosstheentireriskspectrum.PotentialrisksfortheopenIrisheconomyarisingfromacon-tinuedincreaseintradetensionsevidentattheinternationallevel,andexacerbatedbytheemergenceofaglobaleconomicslow-down,alsocontinuetobeareasofconcernforus,warrantingclosediscussionandawareness.Domestically,emergingspend-ingpressuresmustbecloselymonitoredandcontrolled,toensurethatourpublicfinancescontinuetobesustainableandstable,andtoensurewecanrespondtothechallengesarisingfromtheserisks.

Inaddition,severaloftheriskshaveevolvedinnewdirections,includingthosearoundthecapacityoftheHigherandFurtherEducationsystem,identifiedasastrate-gicsocialriskthisyear.Whilerisksaroundhumancapitalandskillsneedsforagrowingeconomywerediscussedlastyear,andinpreviousyears,andaredealtwiththisyearundera‘SkilledLabourShortages’risk,anadditionalriskfor2019focusesaroundtheimportantroletheHEandFETsectorsplayintheIrisheconomy,andtheimportanceofensuringadequatelevelsoffundingfortheHEsectoraremaintained,andthatanappropriate,sustainablemodeloffundingisinplace,especiallyinlightofdemographic

challengesandtheincreasingdemandforthirdlevelplacesoverthecomingyearsthatisnowforecast.

Anotherstrategicsocialriskthathasemergedthisyearrevolvesaroundriskstosocialcohesionandinparticularrisksaroundperceivedimbalancesinaregionalandruralcontext,versusurbanareasandcities.InlinewithsimilartrendsinothercountriesinbothEuropeandtheUS,therearesignificantperceptionsofafocusonjobcreationandinfrastructureinvestmentconcentratedincities,andtothedetrimentofruralcommunities.

OtherongoingriskssuchasinternationaltaxchangesandtheIrisheconomy’sreli-anceonmultinationalcorporations’inaneconomiccontext,thesocialrisksassoci-atedwithourchangingdemographicsandageingpopulation,environmentalriskssuchassupplyandaffordabilityofhousingandovercominginfrastructuregaps,andongo-ingandevolvingcybersecurityrisksarestillrelevant,andarediscussedthroughouttheReport.

Forsomeongoingrisks,whiletheymaynotbenewrisksidentifiedforthefirsttimethisyear,greaterpublicawarenessandanincreasedsenseofurgencyandresponsive-nesstotheriskscanbefelt,forexample,inthecaseofbothClimateChangerisks,whereanincreaseddemandforactioncanbefeltfromthepublicandthepoliticalsys-tem,andinthecaseoftheimpactofsocialmediaonpublicdebate,withboththepolit-icalandpolicysystemandindustryrampingupactioninthisarea.

Asalways,andasevidentthroughtheabovediscussions,theinter-connectionsbetweentheserisksareeverapparentandmustbetotheforefrontinanydiscussionofindividualrisks.WeknowthatBrexit,

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regardlessoftheformittakes,willimpactnegativelyontheIrisheconomy,whichinturnwillhaveimplicationsbothforotherpotentialrisksfortheeconomyincludingtheriskofoverheatingandlossofcompet-itivenessontheonehand,aswellasim-pactingonsocialrisksidentified,includingexpectationsforpublicexpenditure,andrisksandissuesaroundmigrationandinte-gration,tonamebuttwo.Indeed,Brexitcanbeseenasanoverarching,umbrellarisk,interactingwithandamplifyingthemajorityoftherisksidentifiedacrossthegeopolit-ical,economic,social,environmentalandtechnologicalspheres.

Similarly,inter-connectionsandknock-onimplicationscanbeseenbetweenunderin-vestmentinHigherEducation,theimpactofdisruptivetechnologytendsonjobsandtheeconomy,andperceptionsofregionalandruralimbalances.Andofcourse,weknowthatnuclearcontaminationcouldhaveseri-ousimplicationsforfoodsafetyandanimaldisease,thatchallengesarisingfrombio-diversityriskshaveeconomicandsectoralimpactsaswellasenvironmentalimpacts,andthatrisksaroundsupplyandaffordabili-tyofhousinghavebothsocialandeconomicaspects,aswellasenvironmental.

WhilewecategorisetherisksinthisReportonthebasisofthemodelusedbytheWorldEconomicForum(geopolitical,economic,social,environmentalandtechnological),forthepurposesofbothorganisationandeaseofconsideration,manyoftheriskscross-cutseveralcategories,andtheRisksandReportshouldbereadandconsideredwiththatinmind.

Inaddition,thisyearweareincludingathematicpiece(atAnnex2),whichtakesamoredetailedlookatoneofourSocialrisks,‘AnAgeingPopulationincludingpensionsandhealthsystemchallenges’.Itdetailsthe

changingstructureandprojectedfuturetrendsinIreland’spopulation,againstaninternationalbackdrop.WhileitisclearthatIreland’spopulationisageing,inlinewithtrendsinothercountries,thisworksetsouttheimpactsthiswillhaveacrossarangeofsectors,andhighlightstheimportanceofappropriatepolicyresponses.Theseinclude,forexample,increasingtheStatePensionAge,increasingparticipationratesofolderpeopleintheworkforce,increasingsavingsforprivatepensionprovision,deliveringonreformsforthehealthsystem,andconsider-ationofpoliciesthatwouldstemthefurtherdeclineinfertilityandbirthrates.

Geopolitical RisksAsasmallopeneconomy,weknowthatIrelandisparticularlyvulnerabletogeopolit-icalrisks.Whilethetop5strategicgeopo-liticalrisksidentifiedforthe2019NationalRiskAssessmentmirrorthosediscussedin2018,itisclearthatineachcasetheriskshaveevolvedand,insomecases,increasedsignificantly.

Asmentionedabove,therisksaroundBrex-ithavecontinuedtointensifyinthemonthssincethe2018Reportwaspublished,withbothuncertaintyandthepossibilityofano-dealBrexitpersistingthroughoutthenegotiationstodate.AlliedtothisarepotentialimpactsandriskstothestabilityofNorthernIreland,andtotheGoodFridayAgreement.These,andotherriskscontinuetoberelevantinthecontextofriskstothestabilityandfuturedirectionoftheEU,asitlookstothestartofanewlegislativecyclein2019withbothEuropeanParliamentelectionsinMayandanewEuropeanCom-missionlaterintheyear.

OutsideofEurope,thelasttwelvemonthshavealsoseenanincreaseingeopoliticaltensionsataregionalandgloballevel,aswellasthecontinuedwithdrawaloftheUS

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National Risk Assessment – Overview of Strategic Risks 2019

comingyears,andinthecontextofongoingdifficultiesaroundinfrastructureconstraintsandhousing,wecouldseeriskstoourcompetitivenessandoverheatingpressuresemerge.

Inaddition,publicexpectationsofaddition-alexpenditureareanincreasingconcern,especiallyatthispointintheeconomiccy-cle,andinthecontextofsignificantdomes-ticandexternalrisks,andtheimportanceofmaintainingappropriatecontrolonexpendi-tureisdiscussedinSection3.3.

Thereareindicationsthatescalatingtradeconflictsattheinternationallevelnowap-peartobeimpactinggrowth,withtheIMFwarningnationalgovernmentstoprepareforan‘economicstorm’asglobalgrowthlevelsundershootexpectations.AsasmallopeneconomyIrelandishighlyexposedtosuchfluctuationsinglobaleconomicandtradingconditions,andtheeconomicrisksinthiscontextforIrelandaresignificant.

Workoninternationaltaxreformcontin-ues,andcontinuestobehighlyrelevantforIreland,particularlyinthecontextoftheim-portanceofIreland’scompetitivecorporatetaxofferingwhichisanimportantpartofourwidercompetitivenessoffering,andtheemergenceofchallengestoourcorporatetaxregime.Relatedtothis,andasdiscussedinpreviousyears,oureconomyandemploy-mentareheavilyinfluencedbyarelativelysmallnumberofmultinationalcorporations,concentratedinafewenterprisesectors.While,ontheonehand,thismultinationalinvestmenthasbeentransformativefortheIrisheconomy,italsocreatesavulnerabilitytochangesinIreland’sattractivenessasalocationforthosecompanies,aswellastosector-specificchangesorrisks,andthesearediscussedinSection3.6oftheReport.

fromthefreetrademodelandincreasinglystrainedrelationswithRussia,withassociat-edrisksofreducedglobaleconomicgrowth,andincreasedinstabilitiesintheglobaleconomy,andfortheIrisheconomy.Risksarisingfrompotentialterroristincidentsandarmedconflictsendure,withsignificantpublicsafetyandsecurityimpacts,aswellaslonger-termreputationaldamage,shouldsuchanattackhappenhere.

Inthisincreasinglytensegeopoliticalland-scape,andwithsuchhighstakes,wemustensurethatweareaspreparedaspossibleforhowtheserisks–bothnearandfar-mightimpactonIrelandeconomicallyandsocially,aswellasinthecontextofpeaceandsecurity.

Economic RisksWhileIreland’seconomycontinuestoperformstrongly,itsgrowthisagainstabackdropofcontinuinghighindebtedness(bothpublicandprivate)whichimpactsonourscopetobuildmeaningfulfiscalbuffersinthecomingyears,againstabackdropofBrexit,theshapeandimpactofwhichisstillunclear,andinthecontextofemergingspendingpressureswhichriskdestabilisingthepublicfinancesifnottightlycontrolled.

WeknowthatanyformofBrexitwouldhavenegativeimpactsfortheIrishecon-omy,buttheimpactsofano-dealBrexitwouldbeparticularlyharsh,andtheserisksaresetoutinSection3.2oftheReport,withaparticularfocusonthemostvulnera-blesectorsoftheeconomyinthisregard.

NotwithstandingthepossibleeffectsofBrexit,therisksofoverheatingintheecon-omy,andrelatedlossofcompetitivenesscontinuetoberelevantfor2019.Asthelabourmarketcontinuestotightenandtheeconomypotentiallyreachesandexceedsitssustainablelevelofproductioninthe

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National Risk Assessment – Overview of Strategic Risks 2019

discussedinpreviousyears,greaterpub-licawarenessandanincreasedsenseofurgencyanddemandforactiononrelatedrisksareapparentthisyear.ResearchfindsthatEarthiscurrentlylosingbiodiversityatarateseenonlyduringmassextinctions.Inaddition,Irishbiodiversityishighlyvulner-abletotheimpactsofclimatechangeandhasalowadaptivecapacitycomparedtoothervulnerablesectors.

Intermsofclimatechangemitigation,weknowthatthecostofinactionexceedsthecostofaction,andthatthisdifferentialwillrisesteeplywithtime.PotentialcoststotheexchequerincludethoseassociatedwithnotachievingcompliancewithourEUGHGemissionsandrenewableenergytargetsto2020and2030.Itwillalsobecriticalbothtopricethecostofcarbonintooureco-nomicmodeltoprovideappropriatelong-termsignals,andtodefineourapproachtocarbonneutralityfortheagriculturesectorinawaythatallowsfortheachievementofourclimatetargetsanddecarbonisationgoalswhilerespectingsustainablefoodsecurity.

Intermsofenergy-relatedrisks,disruptionstothesupplyorpriceofoil,gas,orelectric-itycouldhavesignificanteconomic,socialorcompetitiveimpacts,andourgeographicpositionrendersusparticularlyvulnerabletosuchdisruptions.Brexitposesaparticu-larriskasIrelandimportsthevastmajorityofitsenergyrequirements,oil,gasandtransportfuels,fromorviatheUK.Thispro-videsanaddedimpetustoincreasetheuseofourrenewableresourcesandtodiversifyoursourcesofsupplybydevelopingfurtherelectricityinterconnectiontoneighbouringmarketsincludingFrance.Asweelectrifyvitalservices,newassociatedrisksarounddevelopmentcosts,andsocietalprovisionsandacceptancefornecessaryinfrastructuredevelopmentwillemerge.

Social RisksAsmentionedabove,someoftherisksidentifiedinthesocialcategoryhavetakenaslightlynewdirectioninthisyear’sRe-port,includingrisksaroundthecapacityoftheHigherandFurtherEducationsystemandthepotentialimpactsonoureconomy,discussedinSection4.1andrisksaroundagrowingpublicdiscourseonruralandregionalimbalancesinthecontextofsocialcohesionastheeconomicrecoverycontin-ues,whicharediscussedinSection4.4.

Aspreviouslymentioned,whiletherisksarisingfromtheimpactofsocialmediaonpublicdebatewereincludedinthe2018Report,increasingpublicawarenessandagreatersenseofresponsivenessonallfrontsisapparent,withboththepoliticalandpol-icysystemandindustryrampingupactioninthisarea.Withlargenumbersofcitizensnowobtainingtheirnewsfromsocialmediaplatforms,thereareclearimplicationsforthegeneration,rapiddissemination,andimpactofonlinedisinformation.Large-scaledisinformationor‘fakenews’campaignsspreadonlineareahigh-riskissueforsoci-etyglobally,includingIreland,andinpartic-ularwheretheytargettheelectoralprocess,andelectoraloutcomes.DevelopmentsinthisareaareoutlinedinSection4.3.

Thischapteralsooutlinestherisksemerg-ingfromdemographicissues,andinpartic-ularpensionandhealthsystemdifficultiesinthecontextofourageingpopulation,aswellasexpectationsforpublicexpenditureandassociatedrisks,andtherisksinvolvedifwefailtomaintainourpositivetrackre-cordintermsofmigrationandintegration,madeallthemorepertinentinthecontextofBrexit.

Environmental RisksAsmentionedabove,whiletherisksaroundClimateChangeandBiodiversityhavebeen

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Relatedtothis,widerrisksaroundourcapacitytoovercomeinfrastructuregaps,inthecontextofchallengesindeliveringasignificantincreaseincapitalinvestmentun-derProjectIreland2040,arestillrelevant,particularlywhencoupledwithanongoingundersupplyofhousingandassociatedaf-fordabilityissues,atighteninglabourmarketandcontinuedstrongeconomicgrowth(asdiscussedinthecontextofoverheatingrisks).

Risksaroundfoodsafetycontinuetoberelevant,asinpreviousyears,withsignifi-canthealth,trade,andreputationalimplica-tionsshouldafoodscareorincidentoccur,andarediscussedinSection5.4.Again,inter-linkagesbetweenrisksarepertinenthere,withtheagri-foodsectoroneofthesectorsparticularlyexposedtoBrexit.

Finally,thesupplyandaffordabilityofhous-ingpersistsasasignificantriskinthisyear’sNationalRiskAssessment,witheconomicandsocial,aswellasenvironmentalim-plications.WhileCSOstatisticsfor2018showthatsupplyisincreasing,difficultiesaroundhomelessnessandaffordabilityarepersisting,andoverallhousingdemandisalsoincreasing.Inthecomingyears,housingshortagesarelikelytoactasaconstraintoneconomicactivityandcompetitiveness,andreflectoneofthemostprominentrisksfacingthecountry.

Technological RisksIntermsoftechnologicalrisks,risksaroundcybersecurity,includingpotentialdisruptiontocriticalinformationinfrastructure,anddatafraudandtheft,continuetobeperti-nentandcontinuetoevolveastheextenttowhichsocietyreliesondigitaltechnologyincreases.WithIrelandpositioningitselfasatechnologicalsociety,withagrowingdependenceononlineservices,theimpactofanattackorincidentontheprovisionof

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services,andonthereputationofbusiness-esandpublicservicewouldbesignificant.

Disruptivetechnologytrendslikewisecon-tinuetoadvance,andtheseadvancesbringrelatedrisksastheypredictsignificantjobsshiftsanddisruption.Automationisexpect-edtoreplacesomejobs,re-shapeothers,andalsocreatenewones.Inaregionalcon-text,researchalsohighlightedthegreaterrisksforregionsfromautomationandjobloss.Therisks,therefore,ifoureducationandskillssystemdon’trespondappropriate-lyandintime,aresubstantial.

Asinpreviousyears,risksaroundAnti-Mi-crobialResistanceandMajorPandemics,andNuclearContaminationarerelevant.Anti-MicrobialResistanceisanincreasingconcernglobally,withtheextensiveuse,misuse,andoveruseofantimicrobialsinhu-manhealthraisinglevelsofresistanceinawiderangeofpathogensinallcountriesandinpatientsofallagegroups.Intheanimalpopulation,therateofdevelopmentandspreadofantimicrobialresistancehasalsoincreased.Inaddition,therisksarisingfromapotentialMajorPandemichaverelevanceacrossseveralriskcategories,includingfinancial,geopolitical,social,environmental,andtechnological.Intermsofnuclearcon-tamination,whiletheprobabilityforIrelandislow,theobviousriskstopublichealthandwell-being,aswellasnegativeeconomicimpactsareclear,andbothawarenessandplanningisimportantinthisregard.

2. Geopolitical Risks

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2.1. Departure of the UK from the EU 2.2. Instability in Northern Ireland 2.3. Future direction and stability of the EU 2.4. Changing distribution of global influence and move away from a rules-based system 2.5 Terrorist incidents and armed conflicts

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2.1. Departure of the UK from the EU

ThedecisionoftheUKtoleavetheEUpresentsuniquelysignificantandunprec-edentedpolitical,economic,socialanddiplomaticchallengesforIreland,giventheextentoftheinter-connectednessofoureconomiesandpeople.ThesearechallengesbothtoIreland’speaceandprosperity,andhowtheyaredealtwithinthemonthsandyearsaheadmayhavesignificantimpactsforIrelandintothefuture.

Ireland’sprioritieshaveremainedconsistentthroughouttheprocess:minimisingtheimpactonIreland’stradeandeconomy;pro-tectingthePeaceProcessandtheGoodFri-dayAgreementinallitsparts;maintainingtheCommonTravelAreawiththeUK;andsecuringIreland’sfutureinastrongEU.Asaresultofintensiveandsustainedengage-mentattheEUlevel,Ireland’suniqueissuesandconcernshavebeenfullyunderstoodbytheEU27andhavebeentotheforeoftheEU’snegotiatingapproach.

FollowingtwoyearsofintensiveArticle50negotiationsbetweentheEuropeanUnionandtheUnitedKingdom,theEuropeanCouncilendorsedtheWithdrawalAgree-mentandthePoliticalDeclarationonthefuturerelationshipinNovember2018.TheWithdrawalAgreementwassubsequentlypassedtotheEuropeanParliamentandis

awaitingitsconsent.TheBritishGovern-menthasalsoagreedtoboththeWith-drawalAgreementandthePoliticalDeclara-tion.However,theWithdrawalAgreementisstillsubjecttoratificationbytheUKParliament.

TheWithdrawalAgreementestablishesthetermsoftheUK’sdeparturefromtheEU.ItensuresthatthewithdrawalwillhappeninanorderlymannerandofferslegalcertaintyoncetheTreatiesandEUlawceasetoapplytotheUK.TheWithdrawalAgreementcoversallelementsoftheUK’swithdrawalfromtheEUincludingcitizens’rights,thefinancialsettlement,atransitionperiod,ProtocolsonGibraltarandIreland,aswellasarangeofotherseparationissues.ItincludesaProtocolonIrelandandNorthernIrelandandalegallyoperational‘backstop’toensurethattherewillbenohardborderbetweenIrelandandNorthernIreland.ItcontainsUKcommitmentsnottodiminishtherightssetoutintheGoodFridayAgree-ment1998andrecognisesthatpeopleinNorthernIrelandwillcontinuetoenjoyEUcitizenshiprights,andtoprotectNorthSouthcooperation.ItacknowledgesthemaintenanceoftheCommonTravelAreaarrangementsbetweenIrelandandtheUK,andforthepreservationoftheSingleElectricityMarketontheislandofIreland.

ThereispersistinguncertaintyregardingtheratificationoftheWithdrawalAgreement

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intheUKparliament.ThedecisionoftheEuropeanCounciltoextendtheArticle50processuntil31October2019providestheUKwithmoretimetoensureanorderlywithdrawal.However,thepossibilityoftheUKleavingtheEuropeanUnionwithoutanagreement–ano-dealscenario–remainsasignificantrisk.

Duetotheclose,highlyintegratedandcon-centratednatureofourtradingrelationshipwiththeUK,amongstallEUMemberStatesIrelandcouldbethemostadverselyaffectedbyBrexitandtothegreatestextentinanodealscenario.innumerousGovernment

publications1,andtherecentlypublishedContingencyActionPlanUpdatelistsanumberofsignificantshort-termrisksthatmayariseintheeventofano-dealBrexit.Inadditiontotheeconomicimpactandrisks,whicharediscussedindetailinChapter3,Brexit-relatedimpactsincludethosetotheCommonTravelArea(CTA)betweenIrelandandtheUK,whichallowsIrishandBritishcitizenstomovefreely

1 TheseincludepreviousNationalRiskAssessments,Budget2019documentation,theCopenhagenEconomicsreport“IrelandandtheImpactsofBrexit”publishedbytheMinisterforBusiness,EnterpriseandInnovation(available:https://www.copenhageneconomics.com/publications/publication/ireland-the-impacts-of-brexit),the2019ESRI/DepartmentofFinancereport“IrelandandBrexit:modellingtheimpactofdealandno-dealscenarios”(available:https://www.esri.ie/news/new-study-estimates-the-impact-of-various-brexit-scenarios-on-the-irish-economy),andtheContingencyActionPlan,Dec2018(available:https://www.dfa.ie/brexit/getting-ireland-brexit-ready/governmentcontingencyactionplan/)

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•SignificantnegativeimpactontheNorthernIrelandeconomy,especiallyintheareaofagri-foodexports;

•LossoforlimitedaccesstorightsandentitlementsforNorthernIrelandresidentsentitledtoEUcitizenship;

•DisruptioninNorth-Southtradeandtheall-islandeconomyduetotariffsandtheimpositionofvariousregulatoryrequirements;

•DisruptiontoNorth-Southcooperationinareassuchasenergy,roadandrailconnectivity;

•LossofaccesstofishinglandingsfromUKEEZ,anddisplacementofotherEUfishingactivityintoIrishwaters;

•Notwithstandingmitigationmeasuresinplace,potentialdisruptiontodailylifeinareassuchasonlineretailpurchasesfromUK,accesstomedicinesandmedicaldevices,andfinancialservicessourcedfromtheUK

•DisruptionofEast-WesttradebetweenIrelandandBritainduetodelaysatportsand/orinabilityofbusinessestomeetregulatoryrequirements;

•DelaystotransitofexportsandimportsthroughtheUKlandbridge,withknock-onimpactsonwholesaleandretailsupplychains;

•Closureofbusinessesand/orlossofjobsinIrelandduetotradedisruptionandassociatedcosts,tariffsandcurrencymovement,inparticularintheagri-food,fisheries,manufacturingandtourismsectors;

•Regionaleconomicandlabourmarketimpactsduetothelocationofmost-exposedbusinesssectors;

•DeteriorationinIreland’smacroeconomicposition,includingdeteriorationinthepublicfinances;

•Communityrelationsundermined,andpoliticalinstabilityinNorthernIrelandandpotentialrelatedsecurityconcerns;

Short-term risks of a no-deal Brexit

TheGovernmentpublisheditsContingencyActionPlanUpdateinearlyJuly,notingthatdespitetheextensivemitigationmeasuresbeingundertakenatEUlevelbytheIrishGovernmentandbybusinesses,significantshort-termrisksintheeventofano-dealBrexitinclude:

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andresideineitherjurisdictionandenjoyassociatedrightsandentitlementsincludingaccesstoemployment,healthcare,educa-tion,socialbenefitsandtherighttovoteinlocalandnationalparliamentaryelections.AswellastheEast-Westdimension,theCTAarrangementsalsounderpintheGoodFridayAgreementinallitsparts,aswellasthecross-borderfreedomscentraltothelivesandlivelihoodsofthepeopleofNorth-ernIrelandandtheborderregion.Anydimi-nutionoftheCTAcouldhaveadestabilisingimpactonthepeaceprocessandonNorth-Southrelations.TheIrishandBritishGov-ernmentshavecommittedtothecontinu-ationoftheCTAinallcircumstancesandaMemorandumofUnderstandingontheCommonTravelAreawassignedbybothGovernmentson8May2019.Separate,sectoralagreementstounderpintherightsoftheCTAhavealreadybeen,orwillshortlybeintroduced.Forexample,theagreementrequiredtomaintainthecurrentarrange-mentsinthefieldofsocialsecurityaftertheUKleavestheEUisinplace–itwassignedbybothStateson1February2019andcompletedtherequiredParliamentaryproceduresinbothStatesduringMarch.

BrexitwillalsoimpactontheoperationofawiderangeofEUlegalinstrumentscon-cerninglawenforcementandjudicialcoop-eration.OfgreatestconcerntoIrelandisthefutureoftheEuropeanArrestWarrant,aswellasEUinstrumentsthatprovidefortherecognitionandenforcementofjudgementsincivil,commercialandfamilylawmatters.Disruptiontolawenforcementandjudicialcooperationarrangementswouldhavea

particularimpactatNorth-Southlevel2.

Inthecontextofimmigration,BrexitmayalsogiverisetoanincreaseinillegalmovementofthirdcountrynationalsintoIrelandfromtheUK,aswellaspossibleconsequencesforsecondarymovementsofasylumseekersandillegalmigrantsfromtheUKtoIrelandintheeventofUKdivergencefromEUasylumlaw. Ano-dealBrexitwouldbeanexceptionaleconomiceventwhichwouldbemetwithexceptionalmeasurestosupportthecontin-uedoperationoftheIrisheconomyandourinternationaltradinglinks.Extensivecon-tingencyplanningandpreparednessworkisunderwayacrossallGovernmentDepart-mentsandAgenciesforapossibleno-dealBrexit.Thisresponsewouldbeimplementedincloseco-operationwithourEUpartners.

2.2. Instability in Northern Ireland TheresultsofthereferendumontheUK’smembershipoftheEuropeanUnioninJune2016showedthatamajorityofvotersinEnglandandWalesvotedtoleavewhilstamajorityinNorthernIrelandandScotlandvotedtoremainwithintheEU.ThishasgivenrisetoconsiderableissuesforWest-minsterandthedevolvedadministrationstoconsider.

ThebreakdownoftheNIExecutiveandthecollapseofthetalksontheformationofanewExecutivetogetherwithincreasesincrosscommunitytensionscreatedbythe

2ThePoliticalDeclarationsettingouttheFrameworkfortheFutureRelationshipbetweentheEUandtheUKoutlinesthebasisforaSecurityPartnershipwhichreferencesmeasurestoensurecoopera-tioninlawenforcementandjudicialcooperationincriminalmatters.IfaWithdrawalAgreementisratifiedtheapplicationofthefullEUacquistotheUKduringatransitionalperiodisofgreatimportance.IntheeventthataWithdrawalAgreementisnotratified,domesticlegislationisbeingpreparedtoensureworkableextraditionandimmigrationarrangementswiththeUKcancontinue.However,anycontingencymeasureswillnotandcannotmitigatetheoverallimpactofano-dealscenario.

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Brexitvote,meansthatNorthernIrelandisfacingachallengingperiodahead.TheinabilityoftheNorthernPartiestoreachacompromiseoncontestedissuesduringthetalksprocesshasallowedthedevelopmentofapoliticalvacuuminNorthernIreland,alongwiththeincreasedpossibilityofthere-introductionofdirectrulebytheUKGovernmentinNorthernIreland.ThisissomethingtowhichtheIrishGovernmentisopposed.

Therestorationoftheinstitutionsisessen-tialinthecontextoffullimplementationoftheGoodFridayAgreement.FollowingthetragickillingofLyraMcKeeinDerry,thetwoGovernmentsconvenedanewshortandfocussedtalksprocessaimedatrestor-ingalltheinstitutionsoftheGoodFridayAgreement.

TheGovernmentwillcontinuetoengagewiththeBritishGovernmentandthepartiesinNorthernIrelandasaco-guarantoroftheGoodFridayAgreementtosupportthere-establishmentattheearliestopportunityofthepower-sharinginstitutions.

Brexithasaddedanadditionalandsignif-icantchallengetothepoliticalsituationinNorthernIreland.Thelackofapower-shar-ingExecutiveinrepresentingandpursuingNorthernIreland’sinterestsinthecontextoftheEU-UKnegotiations,withtheUKandIrishgovernmentsasappropriate,isofsignificantconcerninrelationtothespecificchallengesofBrexitforNorthernIreland.AnExecutiveisalsorequiredforthefunction-ingoftheNorthSouthMinisterialCouncil,tooverseeandfurthercross-bordercooper-ationintheagreedsectorsandtoconsiderandaddresstheall-islandissuesraisedbyBrexit.ThelackofanExecutivehasresult-edinatangibleslowdowninNorthSouthengagementatpoliticallevelandhashadadetrimentaleffectontheeffectiveopera-

tionoftheNorthSouthbodiessetupundertheGFA.

BoththeIrishandtheUKgovernmentshaveaffirmedthattheprinciples,proce-duresandinstitutionsoftheGoodFridayAgreementremainthebasisfortheiren-gagementinNorthernIreland.EnsuringthattheGoodFridayAgreementandthebene-fitsofthepeaceprocessarenotdisturbedbyaUKexitfromtheEUispriorityfortheGovernment.

AsmentionedaboveasregardstheUKwithdrawalfromtheEU,theWithdraw-alAgreementalsoincludesaProtocolonIrelandandNorthernIrelandandalegallyoperationalbackstoptoensurethattherewillbenohardborderbetweenIrelandandNorthernIreland.ThereiscontinuinguncertaintyregardingtheratificationoftheWithdrawalAgreementintheUK.TheGov-ernmentsobjectivesinanyBrexitscenarioareclear–toavoidahardborderontheislandofIrelandandtoensuretheintegrityofthesinglemarketandthecustomsunion.

Anumberofsubmissions,outofthe650plussubmissionsreceivedunderthepublicconsultation,relatedtothe“borderpollquestion”.Althoughaborderpollwouldnotberegardedasarisk,andtheveryimport-antandsensitivepolicyissuesrelatedtoitwouldnotbedealtwithintheNationalRiskAssessmentprocess,thequestionofrelationshipsontheislandofIreland,andbetweenthetwoislands,arealwayscon-sideredaspartoftheannualNationalRiskAssessment.TheNationalRiskAssessmentwasoneofthefirstofficialacknowledg-mentsoftherisksposedbyapotentialBrexitincludingassociatedrisksforNorth-ernIreland.SincetheNationalRiskAssess-mentwasfirstintroduced,theseissueshavefeaturedprominently,andbeensupportedbyaccompanyingtextinthepublishedan-nualreports.

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ThePreparingforthewithdrawaloftheUnitedKingdomfromtheEuropeanUnion–ContingencyActionPlanUpdatepublishedinJuly2019alsoidentifiesthatanodealBrexitriskssignificantlyunderminingwidercommunityrelationsandpoliticalstabilityinNorthernIreland,withpotentialrelatedsecurityconcernsandelaboratesthatcallsforaborderpolltobeheldwouldincreaseinsuchascenario.Thiscouldalsohaveim-plicationsforthestabilityoftheinstitutionsiftheyareinplace,ortheprocesstorestorethemtooperation.Thelongertheuncer-taintyofanodealscenariopersists,themorepoliticalandcommunityrelationshipsinNorthernIrelandwouldbetested.

Uncertaintyaroundaphysicalborderontheislandcouldalsobeexpectedtobecomeafocusfordissidentrepublicanparamil-itaryrecruitmentandactivity.GardaandPSNIauthoritieshavesaidpubliclythatanyborderinfrastructureorpersonnelwouldbecometargetsfordissidentrepublicanparamilitariesandrequirepoliceorotherprotection.

AnodealBrexitalsohasthepotentialtobecomeafocusforincreasedloyalistpara-militaryrecruitmentandactivity,includinginresponsetodissidentrepublicanparamil-itaryactionsandanincreasedpublicfocusonaborderpoll.

IftheinstitutionswerenotinplaceatthetimeofanodealBrexit,thereisariskthattheUKGovernmentmightinitiateamovetoDirectRuleinNorthernIrelandasaresponsetomanagingthetransitiontonewarrangementsinthetimeframeinvolved.

ThecentralpriorityoftheGovernmentinthisregardistoworkurgentlyandinpart-nershipwiththeUKGovernmenttosupporttherestorationoftheinstitutionsoftheGoodFridayAgreementtofulloperationon

amoresustainablebasis,andtoaddresskeyissuesofdivisionbetweenthemainpartiesthathaveaffectedpartnershipgovernmentinNorthernIreland.Havingtheinstitu-tionsworkingonbehalfofallthepeopleofNorthernIrelandwouldbecrucialinman-agingtheimpactsofanyBrexitscenarioontheisland.

TheGovernmenthasalwaysrecognisedtheneedforadvancepreparationsforreferendaandthiswouldbeofparticularimportanceinthecaseofaborderpollgiventhepoten-tialimpactonallthepeopleoftheislandofIreland.ThelessonsoftheUKBrexitRef-erendumareofparticularresonanceinthiscontext.

BrexithasalsoplayedsignificantlyintothedebateinScotlandaboutitsfuturewithintheUK,raisingquestionsinrelationtothedevolutionsettlementandthepossibilityofafurtherindependencereferendum.DisagreementshavearisenbetweentheScottishandUKGovernmentsinrelationtotheoperationofcurrentdevolutionar-rangements,andinparticularthehandlingpost-BrexitofmattersofEUcompetencethatwerenotreservedtoWestminsterunderthetermsoftheScottishdevolutionsettlement.ThestatusofScotlandintheUnitedKingdomisaninternalmatterforthepeopleofScotlandandthepeopleoftheUnitedKingdom,andthereforeamatteronwhichtheIrishGovernmentdoesnotandwillnotengage.

QuestionshavebeenraisedregardingtheapplicabilitytoScotlandofanyarrange-mentsmadetoaddressthechallengesposedbyBrexitforNorthernIrelandandfortheislandofIreland.However,thesitua-tioninNorthernIrelandisuniqueandnotdirectlycomparabletothatinScotlandinparticular,giventhenatureofthepoliticalandconstitutionalsettlementoftheGoodFridayAgreement.

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2.3. Future direction and stability of the EU

Europehasundergoneaseriesofcrisesinrecentyears:theeurozonecrisis,themigrationcrisis,terrorattacksinanumberofMemberStatesandtheshockofBrexit.Thesehaveplayedoutagainsttheback-groundofariseofpopulismasshowninelectoraladvancesbyextremeright-wingand/orEuroscepticpartiesinanumberofEUstateswhileinsomeCentralandEasternMemberStates,thereisagrowingdefianceofEUvaluesandnorms.

Inaddition,concernsaboutadversemarketreactionsasmonetarypolicynormalises,andvulnerabilitiesinthebroadereuroarearemain,particularlyinthecontextoftheunwindingoftheECB’sQuantitativeEasingprogramme,andsignificantamountsofdebtinsomeEUeconomies,includingIreland,withrelatedrisksaroundthesustainabilityoftheEurozone.

Ontheotherhand,employmentinEuropeisatarecordhighandunemploymentatarecordlow3.TheEuropeaneconomyisexpectedtogrowfortheseventhconsec-utiveyearin2019,butatamoremoderatepaceatatimeofmorepronouncedglobaluncertainty.

ThisyearmarksthestartofanewlegislativecycleintheEU.InMay,therewillbeEuro-peanParliamentelectionsand,inturnthenewParliamentwillelectthenextEuropeanCommissionPresidentandapprovetheap-pointmentofanewEuropeanCommission.

TheEuropeanCouncilisresponsibleforde-terminingthegeneralpoliticaldirectionandprioritiesoftheEUandinJuneitwilladoptanewStrategicAgendafor2019-2024.

3 Availablehere:https://ec.europa.eu/social/main.jsp?langId=en&-catId=89&newsId=9316&furtherNews=yes

ButarecentEuropeanCouncilonForeignRelations(ECFR)reportprovidesaworryingsnapshotofthepotentialdisruptiveeffectaone-third“anti-European”Parliamentcouldhaveonforeigntrade,theruleoflaw,mi-gration,foreignpolicy,andtheappointmentofthenextCommission4.

ThenewEuropeanParliamentwillalsohaveanimpactontheEUbudgetfor2021to2027,theMultiannualFinancialFramework(MFF).ThisisthefirsttimeIrelandwillenteranewMFFasanet-contributor.Itwillbeachallengetoensurethefinaloutcomere-flectsIrishprioritiessuchastheprotectionoftheCommonAgriculturalPolicyandpro-videsadequatefundingfornewchallengessuchasmigration.

AdditionalongoingorcontinuingriskstotheunityandeffectivenessoftheEUinclude:

• Riskofnegotiationsbreakingdown,caus-ingdivisionsamongstMemberStates–forexample,inrelationtotheEUbudget;• RiskthatthelossoftheUKvoiceinEUdecision-makingcouldtipthebalanceofintereststowardsamoreconservativeorprotectioniststance;and•RisksspecifictoIreland’sinterestsandin-fluencingpowerwithintheEUwhichcouldemergefromadisruptiveEuropeanParliamentandthelossoftheUKasanegotiationpartner.

2.4. Changing distribution of global influence and move away from a rules-based system

Geopoliticalvolatilityanduncertaintycontinuedthroughout2018andinto2019,givingrisetoheightenedthreatsto

4 Availablehere:https://www.ecfr.eu/specials/scorecard/the_2019_European_election

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internationalpeaceandsecurity,exacerbatedbyeffortstoweakenthemulti-lateralrules-basedsystem.

Thelasttwelvemonthshaveseenanin-creaseingeopoliticaltensionsatregionalandgloballevel,including(thoughnotlimit-edto)theKoreanPeninsula,betweenRussiaandtheUS,RussiaandUK,ChinaandtheUS,theUSandIran,andIndiaandPakistan.TheseriousconflictsongoinginSyriaandYemenarecausingsignificanthumanitariancrisesandirregularmigration.Thehumani-tarianandpoliticalsituationintheOccupiedPalestinianTerritorydeterioratedfurtherin2018,withsettlementbuildingincreasingintheWestBank,andsignificantunrestinGazabeingmetbyseeminglydispropor-tionateIsraelimilitaryforce.TheUSwith-drawalfromtheIrannuclearagreementhasincreasedtensionsacrosstheMiddleEast,andrisksdamagingthepotentialtoresolveotherglobalconflictsbymeansofinterna-tionalagreements.Themarkedincreaseintheuseofchemicalweaponsinrecentyearshasseriouslythreatenedtounderminetheuniversalprohibitionontheuseofchemicalweapons.

ThecurrentUSadministration’swithdraw-alfromtheJointComprehensivePlanofActionwithIran,aswellastheTrans-Pa-cificPartnership(TPP),re-negotiationoftheNorthAmericanFreeTradeAgreement(NAFTA),reducedroleattheWorldTradeOrganisation(WTO),andintroductionofseveralroundsoftariffsonChineseproductsover2018and2019allfurtherstrengthenpreviousindicationsthattheUSaremovingawayfromthefreetrademodel,withassociatedrisksofreducedglobaleco-nomicgrowth,andincreaseduncertaintiesandinstabilitiesintheglobaleconomy.

Russia-USrelationsareincreasinglystrained,asarerelationsbetweenRus-

siaandtheUKandWesternallies.Thisisreflected,forexample,intheexpulsionbytheUKof23diplomatsfollowingapoison-ingincidentintheUKinMarch2018withsuspectedRussianinvolvement,andthesubsequentexpulsionsbyanumberofEUandWesternstates,includingIreland,andtheUSandNATOinsolidarity.TheRussiangovernmentretaliatedwiththesubsequentexpulsionof59diplomatsfrom23coun-tries,including1fromIreland.

PreviousNRAReportsdiscussedglobalisa-tiontrendsinvolvinganongoingandsignif-icantshiftofpoliticalandeconomicpowertowardscountriesintheEastandSouth,representingachallengetotheexistinginternationalorder.Commentsthatsuchtrendsnecessitatemorestrategicanddeep-erengagementwithAsian,AfricanandLatinAmericancountriescontinuetobevalid,intermsofprotectingandpromotingIreland’strade,tourismandinvestmentinterests.

Asanopenglobaleconomy,anymoveawayfromarules-basedmultilateralismsystemattheinternationallevelwouldnotbeinlinewithIreland’sinterests,andcouldposesignificantrisksforus.

2.5. Terrorist incidents and armed conflicts

Therisksarisingfromterroristincidentsandarmedconflicts,ashighlightedinpreviousReports,remain.2018sawcontinuinghightensionsintheMiddleEastandinNorthEastAsia(DemocraticPeople’sRepublicofKorea)aswellasterroristincidentsandattacksacrossEurope,inparticularintheUK.OngoingtensionsbetweenIndiaandPakistanrepresentathreattoregionalsta-bilityandthusIrishinterestsintheregion.Inaddition,asbotharenuclearpowers,in-creasedconflictisathreattoIreland’spolicy

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positiononandeffortstosupportnuclearnon-proliferation.

Overthepast12months,conversationsaroundtheriskstoIrelandandtheIrishresponsecapacityinthisregardhavealsoincreased,highlightingincreasedawarenessoftherisksinvolvedintheIrishcontext.

Europoldatasuggeststhattheoverallthreatfromjihadistterrorismremainshigh,withthenumberofarreststotalling705in2017,downslightlyfrom718in2016.Therehasalsobeenasignificantslowdowninthenumberofforeign-bornfighterstravellingtoSyriaandIraq.Therehasbeenamarkedriseinright-wingextremistattacks,withajumpfrom99attacksin2016to137attacksin2017.ThistrendisevidencedbytherecentmosqueattacksinNewZealand.Leftwingandanarchistterrorismhasdeclinedslightlybetween2016and20175.

Likeothercountries,Irelandanditscitizenscouldbenegativelyaffectedbyterroristincidents,dependingonthelocationofsuchincidentsandtheirwiderimpact.The2017attacksinLondon,ManchesterandtherecentattacksonaMosqueinChrist-churchandSynagogueinPittsburghservetohighlightthechallengingnatureofthethreatandtheneedforcontinuedco-oper-ationamongpartnerstatestocounteractit.Suchanattackherecouldhavesignificantimpactintermsofpublicsafetyandsecurityintheshortterm,andtherecouldpossiblybelonger-termreputationaldamagetoIre-landasasafeandsecuredestinationtoliveandworkin,andtovisit.Anyimpactsonthetourismsector,forexample,couldhavepotentiallyseriouseconomicconsequences.

Likewise,abreakdownininternationalpeaceandsecurityarisingfrominter-state

5EuropeanUnionTerrorismSituationandTrendReport2018;https://www.europol.europa.eu/activities-services/main-reports/eu-ropean-union-terrorism-situation-and-trend-report-2018-tesat-2018

warsorotherarmedconflictscouldhavesignificantrepercussionsforIrelandandtheEU,includingpotentialimpactsonenergysupplies,transportroutesortheenvironment.

OntheislandofIreland,theGoodFridayAgreementhasdeliveredastablepeaceprocessthatcommandsoverwhelmingcrosscommunitysupport.Nonetheless,certaingroupsinbothcommunities,albeitwithverylimitedlevelsofsupport,remainintentondisruptingthesignificantprogresswhichhasbeenachievedandperpetratingactsofviolence.Recenthigh-profileincidents,includingattacksonsecuritypersonnelinNorthernIreland,thecarbombinDerryandthemurderofjournalistLyraMcKee,areareminderthatwecannotbecomplacent.Accordingly,therelevantauthoritiesneedtocontinuetheirworktocombatthesegroupsandtheiractivities.LegacyissuesarisingfromconflictinNorthernIrelandandcurrentsocialandeconomicchallengesalsoneedtobeaddressed.BoththeIrishandBritishgovernmentshavereaffirmedtheircommitmenttoensuringthatthebenefitsofthepeaceprocessarepreservedinanynewarrangementsarisingfromtheUK’sexitfromtheEU. 

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3. Economic Risks

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3.1. Economic Impact of Brexit 3.2. Risk of Overheating 3.3 Public Expenditure Pressures 3.4. Global Slowdown, including changes to international trading environment 3.5. International tax changes 3.6. Reliance on multinational corporations and sectoral concentration

3.0. Introduction

WhiletheIrisheconomycontinuestoperformstrongly,therearevariousfactorsthatcouldpresentsignificantrisks.Therisksareoutlinedinthefollowingsectionsindetail.Theyshouldbeseenagainstabackdropofcontinuinghighindebtedness(bothpublicandprivate)andemergingexpenditurepressures.TheState’scomparativelyhighlevelofdebtmeansthat,atanadvancedstageoftheeconomiccycle,Ire-landexhibitsminimalscopetobuildmeaning-fulfiscalbuffersinthecomingyears.Indealingwiththeseissues,todateIrelandhasbenefit-tedfromabenigninternationalfinancialen-vironment.Anyreversalinlowglobalinterestrates,suchastheexpectednormalisationinECBmonetarypolicy,wouldleadtoincreaseddebtservicingcostsandassociatedimpactsonthepublicfinancesovertime.Thesefactors,andalackofmeaningfulfiscalspace,wouldamplifytheimpactontheeconomy,shouldemergingspendingpressuresriskdestabilisingthepublicfinances,andshouldanyoftheeco-nomicrisksoutlinedbelowmaterialise.

3.1. Economic Impact of Brexit

TheexitoftheUKfromtheEUisanunprec-edentedeventinmoderneconomichistory.Therecontinuestobeconsiderableuncertain-tyregardingmanyissues,notleastofwhichisthelikelyformatoftheUK’sexit.However,assetoutintheContingencyActionPlan

Update,publishedon9July,itistheGov-ernment’sassessmentthatthereisnowasignificantriskofano-dealBrexiton31Octoberorthereafter.

Itisclearthatduetoourcloseeconom-icandtradingrelationshipwiththeUK,IrelandwillbeimpactedmorethananyotherEUcountry.Brexitwillhaveasignifi-cantimpactonoureconomy,includingtheall-islandeconomy,thelabourmarketandthepublicfinances,withthemostnegativeimpactslikelytobeinagri-foodandindige-nousmanufacturingsectors.

TheUK’sdeparturefromtheEUisaneventwithoutprecedentinmoderneconomichistory,andquantifyingtheimpactofthisischallenging.Nonetheless,estimatingtheimpactisimportanttohelpGovernmenttounderstandthepossiblemacroeconomicimplicationsandtodesigntheappropriatepolicyresponse.

InMarch2019,theESRIandtheDepart-mentofFinanceproducedupdatedes-timatesofthepotentialmacroeconomicimpactsofBrexitontheIrisheconomy.Thisworktakesaccountofsubstantialnewmicroeconomicresearchontheimpactoftariffandnon-tariffmeasures,alongwithrevisedassessmentsoftheimpactontheUKthathavebeenproducedsincetheini-tialimpactassessmentofBrexitbytheESRIandDepartmentofFinancein2016.The

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variousBrexitscenarioresultsshowthattheimpactsontheIrisheconomyarelargeandthatBrexitwillultimatelynegativelyimpactfirms,households,thelabourmarketandthepublicfinances.

Thisstudyfindsthat,comparedtoanoBrexitbaseline,thelevelofGDPinIrelandtenyearsafterBrexitwouldbearound2.6percentlowerinadealscenarioand5.0percentlowerina‘DisorderlyNoDeal’scenar-io,respectively.

Ano-dealBrexitwouldresultinasharpreductioningrowthwithnegativecon-sequencesthroughouttheeconomy.Thereducedgrowthwouldfeedthroughthefiscalchannelastheautomaticstabiliserswouldbeactivated.Specifically,taxrevenuewouldbelowerandtherewouldbeupwardpressureonexpenditureareas,inpartic-ular,socialprotectiontransfers.Ireland’sEUbudgetcontribution,fundedfromtheExchequer,mightalsoincreaseinanodealscenario,giventhattheEU’scontingencymeasureinrelationtotheEUbudgetisfor2019only.

ThestudyalsoemphasisesthenegativeimpactBrexitwillhaveontheIrishlabourmarket.Theresultsfromthestudyshowthatemployment,inthelongrun,wouldbe1.8percentlowerinadealscenarioand3.4percentlowerina“DisorderlyNoDeal”scenario,comparedtoascenariowheretheUKstaysintheEU.

ThedeteriorationinIreland’sfiscalbalancewouldbestructural,notcyclical,innature.Thiswouldreflectapermanentreductioninthesizeoftheeconomyand,consequentlyintheamountoftaxrevenueitgenerates.UnderthedisorderlyBrexitscenario,thiscouldinvolveaheadlinedeficitintheregionof–½to–1½percentofGDPfornextyear,dependingonthemagnitudeofthe

economicshock.Thewiderangereflectstheuncertaintysurroundingthebudgetaryimpactofsuchanunprecedentedshock.

Itisimportanttorecognisethatsuchestimatesmaynotcapturethefullimpact,andthefiguresmaybeconservative.IntheeventofanodealBrexit,therewouldbesignificantdisruptionwithfurtherneg-ativematerialimpactsonIrelandandtheall-islandeconomy,particularlyintheearlyyears,arisingfromissuessuchassignificantmarketvolatility,furthersterlingdepreci-ation,anddisruptiontotradewiththeUKincludingNorthernIreland.ThefullimpactwillalsodependondecisionstakenbytheUKinrelationtotariffsimposedongoodsfromtheEU,includingIreland.

Therearealsosignificantsectoralandre-gionaldimensionstothiseconomicimpactandsomesectorsandregionswillbemoreaffectedthanothers.Indeed,thenegativeimpactswillbemostkeenlyfeltinthosesectorswithstrongexporttiestotheUKmarket–suchastheagri-food,manufac-turingandtourismsectorsandalsoSMEsgenerally–alongwiththeirsuppliers.Theimpactwillbeparticularlynoticeableintheregionswherethereisarelianceonthesesectorsandbusinessesasfirmsadjusttopotentiallyhighertariffandnon-tariffbarri-ers,aswellascurrencyfluctuations.Fur-ther,givenIreland’suniquemacroeconomicandsectoralexposurestotheUK,theseimpactswouldbedisproportionaterelativetotherestoftheEU.

Theunprecedentednatureoftheeventmeansforecastsaresubjecttogreateruncertaintyandvariancethanduringnormaltimes.AnalternativestudybytheCentralBankofIrelandsuggeststheshort-runandlong-runimpactsofadisorderlyBrexitcouldbemorenegativethantheDepart-mentofFinance/ESRIstudysuggests.This

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studyputsgreaterweightontheeffectsofuncertaintyonconsumerandbusinessdecisions.TheCentralBank’sestimate,aspublishedinJanuary2019,isthatadisor-derlyBrexitcouldreducethegrowthrateoftheIrisheconomybyuptofourpercentagepointsinthefirstyear.Overtenyears,theCentralBankestimatesthatadisorderlyBrexitcouldreducetheoveralllevelofIrishoutputby6.1percent,ascomparedto1.7percentinthecaseofatransitiontoaFreeTradeArea-likearrangement.

TheGovernmentiscurrentlyplanningitsapproachtoBudget2020basedbothonanorderlyandadisorderlyscenario.TheGovernmentwillcloselymonitordevelop-mentsintheUKoverthecomingmonthsanddecidewhichscenarioisthemostlikelyandbaseBudget2020onthat.

Theservicessectortoofacessignificantdisruption.InsomeareaswherefirmshavenotdoneadequatecontingencyplanningconsumerswillnolongerbeabletoaccessfinancialservicesfromUKproviders.RiskstoconsumersaresignificantlyreducedasthefivelargestretailbanksareauthorisedinIrelandandlargepartsoftheinsurancesectoraresimilarlyauthorisedintheEEAorwillbeauthorisedtherebeforeBrexit.Themostmaterialriskisforcustomersofinsur-ancefirmsanddistributorswhohavenotcompletedanadequatecontingencyplanintime.ThisissuehasbeensolvedthroughtheBrexitOmnibusBill.InothersectorsoffinancialservicescustomersmaybedealingwithfirmsintheUKwhocannottransactwiththempost-Brexitandcompetitionmaybelessenedinsomenichelinesofbusiness.WhilethismayariseitisnotexpectedtobematerialandweexpectthatsuchcustomerswillhavealternativeprovidersavailableandauthorisedintheEU27.Buttheriskcannotbeeliminated.

Intermsofregulatoryrisks,ano-dealBrexitwillintroducebothimmediateandlon-ger-termdisruptionforIrishbusinessesandindustrieswhocarryoutsignificanttradewiththeUK.Inadvanceoftheoutcomeofnegotiations,thelevelofriskisdifficulttofullyassess.LessdemandingregulationcouldputUKfirmsatacompetitivead-vantagewhilstfurtheradvantagescouldemergeshouldtheUKbeabletoaiditsindustriesandbusinessthroughtheuseofStateAidinthefuture.Regulatorydi-vergencewouldalsointroducebarrierstotrade,potentiallyinterruptingthesupplyofgoodsandservices,disruptingsupplychainsetc.

Moregenerally,Brexithasintroducedalev-elofuncertaintywhichmayresultinforeignenterprisesholdingoffoninvestmentde-cisionsuntilgreaterclarityemerges.ThereisaneedtomaintainafocusonenhancingIreland’scompetitivenessasaresultoftheincreasinglycompetitivemarketforinterna-tionalinvestment,andasotherEUMemberStatescompetetoattractforeigninvest-mentlookingforaccesstotheEUmarket.

3.2. Risk of Overheating Followingonfromtheperiodoffiscalconsolidationintheyears2008to2014,ithasbeenpossibletoonceagainincreaseexpenditureonthedeliveryofpublicser-vices.Budgetssincethenhavesetaboutincreasingexpenditureinkeypriorityareaswhilealsoensuringtheviabilityofthepublicfinances.TheenhancedengagementwiththeOireachtas,particularlytheSelectCommitteeonBudgetaryOversight,hasalsoassistedinformulatingBudgetswhilereachingbroadconsensusonkeypriorities.

Astheeconomicrecoverycontinues,theexpectations,fromarangeofsources,that

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additionalresourceswillbemadeavailabletomeetgrowingdemandsfornewservicesandserviceimprovementsmaynotbeconsistentwiththeavailableresourcesbothintheshortandmediumterm.Thisrequiresacontinuedfocusontheeffectivenessandsustainabilityofpublicexpenditureandabroadunderstandingoftheneedtoen-surethatpublicexpenditureincreasesareaffordablebothtodayandoverthelongerterm,andthatcostover-runsandaddition-alexpenditureiscontrolled.Atthisstageoftheeconomiccycle,emergingspendingpressuresmustbecloselymonitoredandcontrolled,toensurethatourpublicfinanc-esremainsustainableandstable,andtoen-surewecanrespondtothechallengesaris-ingfromtherisksdiscussedthroughoutthisReport.TheIrishFiscalAdvisoryCouncil,forexample,intheirNovember2018FiscalAssessmentReport,warnedthat“repeatedfailurestopreventunbudgetedspendingincreaseshaveleftthepublicfinancesmoreexposedtoadverseshocks”.

PublicServicesaredeliveredthroughtheworkofpublicservants.Consequently,thepublicservicepaybillisanimportantelementofoverallpublicexpenditure.Ex-pectationsinrelationtoincreasesinpublicservicepayneedtobemanagedwithinthecontextofensuringsustainablepublicfinancesandeffectivedeliveryofservices.

Further,Ireland’spublicdebt,andthepotentialforrisinginterestrates,marketvolatility,Brexit-relatedmattersandotherfactorstoimpactonthecostofservicingourpublicdebt,couldhaveconsequentimpactsontheappropriatefiscalstancefortheeconomy.Sustainabilitymetricsshowthatalthoughdeclining,publicindebted-nessremainshighinIreland.Thesemetricsincludetheabsolutelevelofdebt,debtinterestpaymentsasashareofrevenueanddebttoGNI*.

TheUK’sdeparturefromtheEUwillhavesignificantimpactsforsectoralpolicy,publicexpenditureandthewidereconomy.DedicatedmeasurestoprepareforBrexitwereannouncedinBudgets2017,2018and2019,toensurethatIrelandisinthebestpossiblepositiontorespondtothechallengesthatBrexitwillbring.However,theextentoftheimpactsandthenatureofriskswilldependonthebasisonwhichtheUKdepartstheEU.Giventhisriskintheexternalenvironment,itisallthemoreim-portantthatexpenditurepressuresarisingfromotherareas,includingdemographicgrowth,capitalinvestmentneedsandpublicdemandsforincreasedservices,areman-aged,withunplannedadditionalexpendi-turecontrolledtoensuresustainabilityovertheeconomiccycle.

3.3. Public Expenditure Pressures

Followingonfromtheperiodoffiscalcon-solidationintheyears2008to2014,ithasbeenpossibletoonceagainincreaseex-penditureonthedeliveryofpublicservices.Budgetssincethenhavesetaboutincreas-ingexpenditureinpriorityareaswhilealsoensuringtheviabilityofthepublicfinanc-es.TheenhancedengagementwiththeOireachtas,particularlytheSelectCommit-teeonBudgetaryOversight,hasalsoassist-edinformulatingBudgetswhilereachingbroadconsensusonpriorities.

Astheeconomicrecoverycontinues,theexpectations,fromarangeofsources,thatadditionalresourceswillbemadeavailabletomeetgrowingdemandsfornewservicesandserviceimprovementsmaynotbeconsistentwiththeavailableresourcesbothintheshortandmediumterm.Thisrequiresacontinuedfocusontheeffectivenessandsustainabilityofpublicexpenditureanda

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broadunderstandingoftheneedtoen-surethatpublicexpenditureincreasesareaffordablebothtodayandoverthelongerterm,andthatcostover-runsandaddition-alexpenditureiscontrolled.Atthisstageoftheeconomiccycle,emergingspend-ingpressuresmustbecloselymonitoredandcontrolled,toensurethatourpublicfinancescontinuetobesustainableandstable,andtoensurewecanrespondtothechallengesarisingfromtherisksdiscussedthroughoutthisReport.TheIrishFiscalAd-visoryCouncil,forexample,intheirNovem-ber2018FiscalAssessmentReport,warnedthat“repeatedfailurestopreventunbudget-edspendingincreaseshaveleftthepublicfinancesmoreexposedtoadverseshocks”.

PublicServicesaredeliveredthroughtheworkofpublicservants.Consequently,thepublicservicepaybillisanimportantelementofoverallpublicexpenditure.Ex-pectationsaboutincreasesinpublicservicepayneedtobemanagedwithinthecontextofensuringsustainablepublicfinancesandeffectivedeliveryofservices.

Further,Ireland’spublicdebt,andthepotentialforrisinginterestrates,marketvolatility,Brexit-relatedmattersandotherfactorstoimpactonthecostofservicingourpublicdebt,couldhaveconsequentimpactsontheappropriatefiscalstancefortheeconomy.Sustainabilitymetricsshowthatalthoughdeclining,publicindebtednesscontinuestobehighinIreland.Thesemet-ricsincludetheabsolutelevelofdebt,debtinterestpaymentsasashareofrevenueanddebttoGNI*.

TheUK’sdeparturefromtheEUwillhavesignificantimpactsforsectoralpolicy,publicexpenditureandthewidereconomy.DedicatedmeasurestoprepareforBrexitwereannouncedinBudgets2017,2018and2019,toensurethatIrelandisinthe

bestpossiblepositiontorespondtothechallengesthatBrexitwillbring.However,theextentoftheimpactsandthenatureofriskswilldependonthebasisonwhichtheUKdepartstheEU.Giventhisriskintheexternalenvironment,itisallthemoreim-portantthatexpenditurepressuresarisingfromotherareas,includingdemographicgrowth,capitalinvestmentneedsandpublicdemandsforincreasedservices,areman-aged,withunplannedadditionalexpendi-turecontrolledtoensuresustainabilityovertheeconomiccycle.

3.4. Global Slowdown, including changes to international trading environment

Ireland,asahighlyopen,export-focussedeconomyisparticularlysensitivetoaslow-downinworldtradeandoveralleconomicgrowth.AdverseexternaldevelopmentscouldimpacttheIrisheconomythroughnumerouschannels,includingthroughex-changeratefluctuations,reduceddemandforexports,increasedpublicandprivatesectorborrowingcosts,anddeterioratingconsumerandmarketsentiment.Inaddi-tion,increasedtariffandnon-tariffbarrierscouldcreatebarrierstotradethatwouldadverselyaffecttheexportsofIrishfirmsandMNCsoperatinginIreland.

Theoutlookfortheglobaleconomyhasbeenworseningsincethesecondhalfof2018.Thelatesteconomicdata,highfre-quencyindicatorsandeconomicforecastsallpointtothepaceofglobalgrowthslow-ing.TheIMFwarnednationalgovernmentstoprepareforan‘economicstorm’asglobalgrowthlevelsundershootexpectations.TheIMFreferenced‘tradetensionsandtariffescalation,financialtightening,uncertaintysurroundingBrexitandanacceleratedChi-neseslowdown’asthefourcrucialfactors

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underminingglobaleconomicgrowth1.Inaddition,theECBcutitseuroareagrowthprojectionsfor20192,signifyingincreaseduncertaintyregardingtheoveralleconomicoutlook.Similarly,theWorldBankpredictsglobalgrowthtobemoderateaseconomicslackdissipates,monetarypolicyaccommo-dationinadvancedeconomiesisremoved,andglobaltradegraduallyslows,andtheOECDsuggestthatglobalGDPgrowththoughstrong,haspeaked.

Asasmallopeneconomy,andoneinwhichmulti-nationalcorporationsplayanimportantrole,Irelandishighlyexposedtochangesinglobaleconomicandtradingconditions.TheEuroAreaaccountsforthelargestproportionofIreland’strade.Some29percentofourgoodsandservicesexportsweredestinedfortheEuroAreain2017,comparedto15percentofgoodsandservicesexportsdestinedfortheUKin2017.Havingoutperformedexpectationsin2017,growthintheEuroAreahasmod-erated.TheEuropeanCommission’slatestforecastsshowtheEuroAreagrowthratein2019willbealmosthalftheratein2017,reflectinggrowinguncertainties.

Momentuminmajoreconomiesisslowing.Severaladvancedeconomies,suchasJapanandGermany,experiencedcontractionsinthethirdquarterof2018.TheItalianeconomyfellintoatechnicalrecession(twoconsecutivequartersofeconomiccontrac-tion)inthesecondhalfof2018.ThepaceofgrowthintheChineseeconomyhasalsoslowed.UKeconomicgrowthcontinuestobemodest,asuncertaintysurroundingBrexitcontinues.

Furthermore,escalatingtradeconflictsarenegativelyaffectingthegrowthoutlook

1 https://www.worldgovernmentsummit.org/events/annual-gather-ing/session-detail/a-conversation-with-christine-lagarde

2 https://www.reuters.com/article/us-ecb-policy-forecasts/ecb-cuts-growth-inflation-forecasts-idUSKCN1QO1O9

inallcountries.Thereareclearindicationsthattradetensionsarebeginningtoim-pactgrowthwithtradevolumes,industrialproductionandmanufacturingpurchasingmanagersindex(PMIs)declining.Leadingindicatorsarealsoacauseforconcern.TheUSyieldcurve,whichhasgoodsignallingproperties,ispointingtoaslowdownintheUSeconomy.Similarly,theOECD’sCom-positeLeadingIndicatorspointtomoderat-inggrowthintheUK,theEuroAreainclud-ingGermany,FranceandItaly,andintheOECDareaasawhole.

Whilstthereisacyclicaldownturninworlddemand,someofwhichisrelatedtocoun-try-specificidiosyncraticfactors(e.g.carindustryinGermany,tradetensionsetc.),therearealsolonger-termstructuralfac-torsatplaywhichhaveresultedinalmostnoexpansioninglobalisationoverthelastdecade.

InaEuropeancontext,theslowdowncanbeseentobeexacerbatedbyspecificeuroareavulnerabilities,forexample,Italianbor-rowingcostscontinuetobeelevatedandaweakereuroareaoutlookcombinedwithapossibleglobaleconomicdownturncouldpresentfurtherchallengeswithcontagiontotheeuroareacontinuingtobeasignif-icantrisk.TheconclusionofQuantitativeEasing(intermsofnetbondpurchases)willbringanendtoaprolongedperiodoflowinterestrates,presentingamorechal-lengingfundingenvironmentintheyearsahead.Quantitativetighteningmayalsofilterthroughtotherealeconomyvis-à-vishigherSMEborrowingcostsormortgageinterestrates,placingadditionalpressureonanalreadyhighlyindebtedhouseholdsectorintheIrishcontext.

Inadditiontothis,aslowdownintheUSandChineseeconomies,furtherintensifica-tionoftradetensionsandacontinuedmove

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towardsprotectionistpolicies,increasingglobalindebtedness,changingglobalfinan-cialconditions,andthetimingandnatureofBrexit,amongstotheruncertainties,poseriskstotheglobaleconomicoutlookgoingforward.

Asmentioned,thisslowingworldgrowthmomentumhasimportantimplicationsforIreland’seconomy.SensitivityanalysisintheBudget2019EconomicandFiscalOutlookshowsthatanexternalshockof1percentinworlddemandwouldreducethelevelofoutputbyaround0.3percentinthefirstyearandbyaround1.0percentafter5yearsrelativetoabaselineprojec-tion.Thisdecelerationwouldbereflectedinthelabourmarketandfiscalbalances.Thisunderlinestheimportanceofimprovingtheresilienceoftheeconomybybuildingfiscalbuffers,maintainingappropriatecontrolonexpenditure,andfocussingoncompetitive-ness.

Overall,recentexternaldevelopmentssuggestthattherehasbeenanoticeabledecelerationinglobaleconomicactivity,partlydrivenbyadversetradepolicydevel-opmentsinsomeofIreland’smaintradingpartners.

3.5. International tax changes

Ireland’scorporationtaxregimeisamajorfactorincreatingfavourableconditionsinwhichIrish-basedenterprisesoperate,aswellasinensuringastableenvironment,transparencyandpredictabilityforinwardinvestment.ItcontinuestobeanimportantpartofIreland’swidercompetitivenessof-feringtoassistenterprisesbasedinIrelandinvest,innovateandcompeteinternation-ally3.However,thehighdependenceof

3NationalCompetitivenessCouncil(2017)Ireland’sCompetitive-nessChallenge2017

Ireland’soutputandvalueaddedonForeignDirectInvestment(FDI)presentsavulner-abilityintermsofhowanchoredforeignmultinationalsaretotheIrisheconomy,whichisfurthercomplicatedbytheongoingprocedureofinternationaltaxreform.

Irelandhasplayedanactiveroleinimple-mentinginternationaltaxreformsthroughtheBEPSproject,andisamongstthecountrieswhohaveadoptedearlythecoun-try-by-countryreportingforlargefirms.Inaddition,UStaxreformshouldleadtosomebehaviouralchangeandshouldeliminatetheabilityforUScompaniestopayverylowtaxratesontheirglobalprofits.Neverthe-less,thereisastrongnarrativethatlargefirmscontinuetohavetheabilitytooperatewithinajurisdictionwithoutpayinganap-propriateamountoftax.Workoninterna-tionaltaxreformcontinueswithadditionalproposalsunderdiscussionatEUandOECDlevelastohowdigitalcompaniesaretaxed.WhileanEUleveldigitaltaxappearslesslikely,theproposalscurrentlyunderdiscus-sionatOECDhavewidenedtoencompassthebroadereconomy.Ultimately,anyre-formwhichseekstoallocategreatertaxingrightstousersorcustomerlocationposeschallengesforsmallcountrieslikeIreland.

Irelandhastakensignificantactionsoncorporatetaxoverrecentyearsandhasintroducedmeasures,bothdomestical-lyandaspartofthewiderinternationaleffort,totackletaxevasionandavoidance.TheOECD’sBEPSproject,andtherelatedDirectivesagreedatEUlevel,haveagaindemonstratedthatco-operative,multi-lat-eralagreementsarethemosteffectivemeanstofacilitateinternationaltradeandcounteractcross-bordertaxevasion.Chang-estoIrishcorporatetaxresidencyrulesim-plementedin2014and2015havereducedopportunitiesforaggressivetaxplanning.TheIrishKnowledgeDevelopmentBox,

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AsdiscussedinpreviousNationalRiskAs-sessments,Ireland’seconomyandemploy-mentareheavilyinfluencedbyarelativelysmallnumberofmultinationalcorporations(MNCs),concentratedinafewenterprisesectors.WhilemultinationalinvestmenthasbeentransformativefortheIrisheconomy,thisalsocreatesaparticularvulnerabilitytochangesinIreland’sattractivenessasalocationforthosecompanies,aswellastosector-specificchangesorrisks.

Foreign-ownedmulti-nationalcorporations(MNC’s)areconcentratedinIreland’smostcompetitiveexportsectors,suchasmodernmanufacturingandICT,andaccountforadisproportionatelylargeshareofoutput,value-addedandproductivity7.ThemostrecentavailableCSOdataindicatesthatasmallnumberof‘foreign-ownedMNCdom-inated’sectors8accountedfor39percentoftotalGrossValueAdded(GVA)in20179. Whileononehand,thisevidenceshowshowsuccessfulIrelandhasbeenatattract-ingandretainingFDI,ontheotheritseemstocorrespondwithmuchmoremodestperformanceamongstIrish-ownedfirmsinthesamesectors.

DespiteseveraldecadesofFDI-ledgrowthinIreland,thereareprevailingandincreas-inggapsinGVA,productivity(GVAperemployee)andwagesbyownership,withforeign-ownedenterprisesgenerallyseeingmuchhigherandincreasingproductivityandwages,relativetoIrish-ownedenterprises.Indeed,despiteIreland’sstrongproductivityperformanceinaninternationalcontext,

7Dept.Finance,PatternsofFirmLevelProductivityinIreland,March2018,seelink:https://www.gov.ie/en/publication/975f17-pat-terns-of-firm-level-productivity-in-ireland/

8Theterm‘foreign-ownedMNEdominated’sector–usedfrequentlyinthepaper–referstoagroupofsubsectorswhereforeign-ownedMNEscreatemorethan85percentofthesectorturnover.

9Seelink:https://www.cso.ie/en/releasesandpublications/er/gvafm/grossvalueaddedforforeign-ownedmultinationalenterprisesandother-sectorsannualresultsfor2017/

introducedin2015,hasbeenapprovedbytheCodeofConductonBusinessTaxationGroupandtheOECDForumonHarmfulTaxPractices.TheGovernmentpublishedanIndependentReviewoftheCorporationTaxCode4in2017andcarriedoutacon-sultationontheimplementationofsomeofitsrecommendations5.TheDepartmentofFinancepublisheditsCorporationTaxRoadmapinSeptember2018whichlaysoutthenextstepsinIreland’songoingworkoncorporatetaxreform.WorkisalsoprogressingonthetranspositionoftheAnti-TaxAvoidanceDirectives(ATADs),withControlledForeignCompany(CFC)rulesandanewExitTaxintroducedinFinanceAct2018,andapublicconsultationcon-ductedinearly2019onimplementationoftheATADanti-hybridandinterestlimitationmeasures.

ItisimportantthatIreland’staxofferingcontinuestobecompetitiveforfirmsseek-inganEUbaseforoperations,andtoattractanddevelopknowledge-basedinvestmentrelatedtoR&DandIP.Astheinternation-altaxenvironmentischangingrapidly,maintainingagoodreputationhasbecomeincreasinglyimportantforthesustainabilityofcorporationtaxpolicyhereinIreland6.Inthiscontext,andinparallelwithdomesticreformsandrestructuring,itisessentialthattheGovernmentcontinuestobeproac-tiveintheongoinginternationaleffortstoco-ordinatetaxstandards.

3.6. Reliance on multinational corporations and sectoral concentration4 https://www.gov.ie/en/publication/fa53d4-review-of-irelands-cor-poration-tax-code/

5 https://www.gov.ie/en/consultation/47e576-consultation-on-cof-fey-review/

6NationalCompetitivenessCouncil(2017)Ireland’sCompeti-tivenessChallenge2017;http://www.competitiveness.ie/News-Events/2017/Competitiveness%20Challenge%202017.pdf

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cantlyimpactIrelandasasmallopenecon-omyhighlydependentonforeigntradeandinvestment.

Inaddition,thenarrowportfolioofMNCsmaygiverisetonegativespill-overeffectstoothersectorsofthelabourmarket.Industrysectorsthataredominatedbyforeign-ownedenterprisesexhibitedthehighestaverageearningsin2018,andthesesectorsalsodisplayedthehighestshareofnon-Irishworkersinrecentyears.Thereisthepotentialofcrowdingoutofemploy-mentinothersectorsasmorepersonsseekemploymentopportunitiesinMNC-domi-natedsectors.Asthesefirmsaretypicallylocatedwithinasmallnumberofurbanareas,thisriskcouldgiverisetoincreasingpressuresinrentalmarketsandthewiderconstructionsector.Highconcentrationmayalsodampencompetitionandinnova-tion.

ItisworthnotingthatIrishcorporationtaxishighlyconcentrated,withthetop10pay-erscontributingcloseto40percentofthistax.Reflectingthelargenumberofsmallandmicroenterprisesintheeconomy,75percentofcorporationtaxpayerspaidanamountlessthanorequalto€20,000;theseaccountforslightlylessthan2percentoftotalnetcorporationtaxreceipts.Therisingshareofcorporationtaxreceiptswithinoveralltaxation(circa19percentoftotalrevenuein2018)andtheconcentrationofreceiptswithinasmallnumberoffirmspos-esasignificantrisktothepublicfinances11.

The2018performanceofthecorporationtaxheadingwasexceptionallystrongwhichinturnhelpedtooffsetunder-performanc-esinotherheadings.Abouttwofifthsofthisfinalcorporationtaxover-performancewasnotanticipatedonBudgetdaywhichunderscorestheinherentvolatilityofthis

11DepartmentofFinance,AnnualTaxationReport,February2019

researchbytheNationalCompetitivenessCouncil10showsthatmostbusinesseshaveexperiencedadeclineinproductivityinrecentyears.Thenarrowbaseofenterpris-esinhighvalue-addedsectors,andwithinsectors,thereforedisguisesthemajorityofunderperformingfirmswhereproductivitygrowthisstagnantorfalling.Theresearchsuggeststhatthetop10percentoffirmsaccountfor87percentofvalue-addedinmanufacturingand94percentinser-vices;thishighlightsIreland’sexposuretofirm-specificshocks.

ThehighdependenceofIreland’soutputandvalueaddedonFDIpresentsavulner-abilityintermsofhowanchoredforeignmultinationalsaretotheIrisheconomy.Manyoftheforeign-ownedenterprisesthatoperateintheIrisheconomytodayhavealong-standingandsubstantiveinvestmentinIreland.However,Ireland’srelationshipwithFDIislikelytobecomplicatedbytheongoingprocedureofinternationaltaxreformandrisinganti-globalisationandpro-tectionistsentiments,inparticularintheUSandUK(thetwolargestsourcesofFDIinIreland),asdiscussedabove.Thesedevelop-mentspresentarisktothesustainabilityofFDIinIreland,andhighlighttheincreasingexposureoftheIrishpublicfinancestopo-tentiallyvolatilecorporatetaxreceipts.

TherearemanyreasonswhyfirmschoosetoinvestinIreland.However,theEU’sDigitaltaxproposalsforacommonconsol-idatedcorporatetaxbaseandthecurrentdiscussionsforfurtherBEPSreformatOECDhavethepotentialtosignificantlyimpactforeigninvestmentflowsinfuture.Asmentionedabove,theemergenceoftheprospectofatradewarbetweentheworld’slargesteconomiescoulddisruptglobaltradeandinvestmentflows,whichwouldsignifi-

10NationalCompetitivenessCouncil,ProductivityStatement2018,seelink:http://www.competitiveness.ie/Publications/2018/NCC-Productivity-Statement-2018.html

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taxheadingineitherdirection.However,itshouldbenotedthesurgeincorpora-tiontaxreceiptsfrom2015onwardshasoccurredintandemwithasurgeincor-porationprofitabilitysincethen.ThisisverymuchconsistentwithdatafromtheRevenueCommissioners,whichshowthattradingprofits(excludingbalancingcharges)increasedby€63billion(66.5percent)between2014and2016(latestavailabledata).

Whilecorporationtaxincomevolatilityhasbeenpositivetodate,inascenariowhereeconomicgrowthslowsoradverseinter-nationaltaxand/ortradedevelopmentsreducecorporatetaxincome,Ireland’scur-rentfinancescouldencounterdifficulties.Inthiscontext,thereisariskoftheStatebecomingdependentonvolatilesourcesofnationalincome.

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4.1. Capacity of Higher and Further Education System 4.2. Skilled Labour Shortages 4.3. An Ageing Population including Pensions and Health System Challenges 4.4. Impact of Social Media on Public Debate 4.5. Social Cohesion including Perceptions of Rural and Regional Imbalances 4.6. Migration and Integration

4.1. Capacity of Higher and Further Education System Anadequatelyresourced,flexible,responsiveandalignedHigherEducation(HE)andFur-therEducation&TrainingsystemhasacrucialroletoplayinsustainingenterprisegrowthinIreland.Skillsaretheglobalcurrencyof21stcenturyeconomies,andmanycountriesareplacingamajorfocusontalentdevelopmentandinvestmentineducationandtraining.ResearchcommissionedbytheIrishUniversi-tiesAssociation(IUA),andpublishedinApril20191,foundthattheIrisheconomybenefit-tedby€8.9billionlastyearfromIreland’ssev-enuniversities,withtheuniversitiesgenerat-ing€386millionperannuminexportearningsand€1.5billioninR&Dimpacts.

Ireland’sHigherEducationInstitutions(HEIs)havebeencentraltodifferentiatingIreland’stalentpoolinaninternationalcontext,aidingtheestablishmentofasuccessfulentrepre-neurshipecosystem,growingindigenousmultinationalenterprises,andcontinuedattractivenessforforeigndirectinvestment.Ensuringthisalignmentbetweenenterpriseskillsneedsandgraduateoutputhelpsdrivein-firmproductivity,innovationandultimatelythecompetitivenessoftheIrisheconomy.

AnydiminutioninresourcesfortheHEsector

1 IndeconInternationalEconomicConsultants;https://saveourspark.ie/wp-content/uploads/2019/04/Delivering_for_Ireland_An_Impact_As-sessment_of_Irish_Universities_2019.pdf

would,however,poseachallengetothiscontinuedrole,placingasitwouldastrainonthesector’spotentialtorespondwithflexibilityandagilitytotheevolvingskillsneedsoftheeconomy-includingtotherequiredscale-aswellasthesupportingroleplayedbyIndustry-Academiacollabora-tionindrivingtheinnovationofindigenousandforeign-ownedenterprises,andinturntheabilityofIrish-basedfirmstocompeteinoverseasmarkets.

Recentyearshaveseenaworryingdown-wardtrendofIrishuniversitiesinglobalrankings,attributedmainlytopost-reces-sionunder-investmentinthesector,andanincreaseinstudentenrolmentnumbers2. Therehasalsobeenasignificantincreaseinthenumberofstudentsenrollingforauniversityeducation,withover120,000studentsenrollingin2017,up40percentfrom20083.

NotwithstandingthatsignificantprogresshasbeenmadeinrecentbudgetsinincreasinginvestmentinHEaswellasotherdevelopmentssuchasanewHuman

2 Itshouldbenotedthatwhilerankingscanimpactoninternationalperceptionsofuniversities,theyrepresentaperceptionofqualityinthesectoronly.

3 AsperHigherEducationAuthoritystatistics,availableat:https://hea.ie/statistics-archive/

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theoverallparticipationratehascontinuedtobebroadlyflatsince2011andisatthesamelevelastheparticipationrateintheearly2000s.Inaddition,whilesourcinginternationaltalentwillalsobenecessarytoovercomecapacityconstraintsintheshortterm,inthepost-recessionworlditislikelytobemoredifficulttoattractforeigntalent.Irelandmustcompetewithothercountriestoattractbothhighandintermediatelevelskilledlabour.

RisksaroundskillsshortagesintheareaofDigital/ICTareparticularlypertinent.Theavailabilityofappropriateskillsfordevel-oping,implementingandusingICT,aswellasgeneralDigitalskills,areanimportantconditionforthecompetitivenessandinnovationcapabilityoftheIrisheconomy.ThestrongEuropeancompetitionforskills,especiallyinaregionwherethereisfreemovementoflabour,makesitimportantforIrelandtodevelop,attractandretaintherighthighlevel,andintermediatelevelDigitalandICTskillstosatisfythedemandacrosstheIrisheconomy.ItislikewiseimperativeforIrelandtobeabletocontin-uetoattractandservetheR&Dactivities,hightechmanufacturingandglobalservicescompaniesthatareimportantforIreland’seconomicgrowth.

Theeducationandtrainingsystem,encom-passingboththeHEsectorandFurtherEducationandTrainingSector,willplayacrucialroleintacklingexistingandemergingskillsneeds,providingeducation,trainingandskillsdevelopmentopportunitiestonewentrantsaswellasongoingupskillingandreskillingofexistinglabourmarketparticipants.Inadditiontotheriskstojobsfromautomation,thenewdigitalworldofworkwillalsocreatejobsnoteventhoughtoftoday.Weneedtoensureoureducationandtrainingsystemissufficientlyadaptable,andappropriatelyresourced,tomeetthe

CapitalInitiative4,thereisariskaroundfailingtosustaintheselevelsofre-invest-mentinfuturebudgetarycycles,toensurethequalityoftheHEsectorismaintained,andtoaccommodatethestrongdemo-graphicgrowththatispredicted.Recentlypublishedstatisticsestimatethatdemandforthirdlevelplaceswillincreaseeachyearupto2030,risingfromthebaselevelof184,000(in2017)topeakatover220,000studentsby2030.Thecontinuedre-invest-mentinHE,combinedwiththedevelop-mentofalonger-termsustainablefundingmodel,willbenecessaryinordertocontin-uetoaidthegrowthandqualityofourHEsystemintheyearsahead.

TheDepartmentofEducationandSkillsiscurrentlyengagedinaproceduretoidentifyamoresustainablefundingmodelforHEintheyearstocome,includinganeconomicanalysisofthethreepolicyoptionsidenti-fiedbytheExpertGrouponFutureFundingin2016.ThisanalysiswillassisttheJointOireachtasCommitteeonEducationandSkillsintryingtobuildpoliticalconsensusaroundthemostappropriatefuturefundingmodelforhighereducation.

4.2. Skilled Labour Shortages Astheeconomycontinuestoexpand,in-creasingtheparticipationrateandsourcingskilledinternationaltalentwillbeimportantsupplementsnecessaryinthecontextofgrowinglabourmarketdemandaswellasexistingskillsshortagesinspecificareas.DespiteIreland’srecoveryinthelabourmarket,theparticipationratecontinuestobebelowits2007peaklevel5andinfact,

4 Budget2019alsoannouncedanewHumanCapitalInitiativethatwillinvolveinvestmentof€300millioninhighereducationoverthe5yearperiodfrom2020to2024,with€60millionbeingmadeavailableineachofthoseyears.

5 ESRIQuarterlyEconomicCommentary,Winter2018.Seelink:https://www.esri.ie/system/files/media/file-uploads/2018-12/QEC2018WIN.pdf

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continuetogrow8.Thesecondisthatthedependencyratio-i.e.,theratioofpersonsunder15andover65topersonsofworkingage(15-64)-willincreaseintothefuture,intheabsenceofimprobablylargeimmi-grationofpeopleofworkingage,whichwillimpactonareassuchaseducation,childincomesupports,healthcare,long-termcare,transport,employment,housingandpensionprovision.Eachofthesewillbeanareaofacuteconcernbutpensions,andchallengesforthehealthsystemmaybeamongthemostserious.

TheEuropeanCommissionestimatesthatpension-relatedexpenditurewillincreaseby4percentageofGDPpointsby2070,whentakingonlydemographicfactorsintoaccount9.WhileIrelandhasacomparativelyyoungpopulationrelativetootherEurope-ancountries,itneverthelessfacesthesamelonger-termageingchallenges.AleadingissueinthisregardisthesustainabilityandcoverageofpensionsinIreland.Statepen-sionsaccountforthesinglelargestblockofsocialwelfareexpenditure,andtheIrishpensionsystemfacesmultiple-veryseriousdemographic,adequacyandsustainabilitychallenges.Thetaskoffinancingincreasingpensionspendingwillfalltoadiminishingshareofthepopulationasprojectionsindi-catetheratioofpeopleofworkingagetoeverypersonagedoverStatepensionagewillreducefromitscurrentrateof4.9:1to2.3:1overthenext40years.ThispresentssignificantfundingchallengeswiththeSo-cialInsuranceFundforecasttoaccumulateapotentialdeficitofupto€335bn10 over thenextfiftyyears.Notwithstandingthe

8 TheCentralStatisticsOfficeestimatesthatthenumberofpeopleagedover65willalmosttrebleto1.45millionpeoplebetween2011and2046.

9 EuropeanCommission(2019)EuropeanSemesterCountryReportIreland.Availablehere:https://ec.europa.eu/info/sites/info/files/file_import/2019-european-semester-country-report-ireland_en.pdf

10 DepartmentofEmploymentAffairsandSocialProtection2017ActuarialReviewoftheSocialInsuranceFund2015.Availablehere:http://www.welfare.ie/en/downloads/actrev311215.pdf

needsofthefuture.

Continuedinvestmenttodeveloptalentandskillstomeetemergingskillsneedsisthere-foreimportant.ThisisparticularlyevidentintermsofthefullimplementationofProjectIreland2040,toensureadditionaleconomiccostsarenotincurredfromcapacityissuesinthiscontext.Thereisaneedtocontinuecooperationbetweenprovidersandem-ployerstoensurethattrainingismeetingemergingskillsneeds.

4.3. An Ageing Population including pensions and health system challenges

Irelandfacessignificantrisksintermsofanageingpopulation.Theshareofpopulationaged65andoverisprojectedtoincreasefromoneineighttooneinsixby2030,andthenumberofpeopleaged85andoverisprojectedtoalmostdouble6.Olderageco-hortstendtobethehighestusersofmosthealthandsocialservicesandhavemorecomplicatedcareneeds.TheresultsfromCensus2016showthatIreland’spopulationincreasedfrom4.588millionin2011to4.762millionin2016.Thenaturalpopula-tionincreasewas196,100withnetoutwardmigrationestimatedat22,5007.Planningfordemographicchangesinthepopulationsoresourcesandservicescanbedirectedwhereneededisdifficult,andtheuncertain-tiesassociatedwithBrexitwillonlyaccen-tuatethisproblem.

Notwithstandingtheuncertaintiesassociat-edwithpopulationprojections,tworelatedissuesarehighlyprobable.Thefirstisthatthenumberofpeopleagedover65will

6 ESRI,2017.Availablehere:https://www.esri.ie/system/files?file=-media/file-uploads/2018-02/RS67.pdf

7 CentralStatisticsOffice(2016)Census2016SummaryResults–Part1(Dublin:CSO).

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ofpeopleinolderagecohortswillcreatesignificantadditionaldemandforarangeofhealthandsocialcareservices,includingnursinghomecare,homecare,andmedi-cines.

Inthecontextofthehealthsystem,IrishhealthexpenditurecontinuestobewellabovetheOECDaverage,notwithstand-ingouryoungpopulation13.AccordingtotheEuropeanCommission’s2018AgeingReport,long-termcareexpenditurewillseeanincreaseby1.9percentagepointsofIrishGDPbetween2016and2070,withanincreaseof1percentagepointofGDPforhealthcarespending,bothaboveEUaverageexpendituregrowth.

Futurehealthcaredemandandthecostofhealthcareprovisionwillbeimpactedbyavarietyoffactorsincludingdemographics;increasingincidenceofnon-communicablediseases(i.e.heartdisease,stroke,diabetes,cancer,chroniclungdisease,anddemen-tia);lifestyleriskfactors;changestomodesofhealthcaredelivery(e.g.ambulatoryemergencycarereducingadmissionsfromEmergencyDepartments,shifttodaycasesurgery);availabilityofnewdrugsandothertechnologicaldevelopments;changesinthesocio-economicstructureofthepopulation(educationlevel,income,employment)andchangesinpeople’sexpectationsofhealthservices;proportionofthepopulationwithprivatehealthinsurance;andsupply-in-duceddemand(e.g.additionalfundingallocatedtoserviceprovision).

Themajorchronicdiseasesofcardiovas-culardisease,cancer,diabetesandchroniclungdiseasealreadyaccountforasignif-icantproportionofhealthcareactivity,including40percentofhospitaladmissions

13 HousesoftheOireachtas(2017)IrishHealthExpenditure:thecomparativecontext,availableat:https://www.oireachtas.ie/parliament/media/housesoftheoireachtas/libraryresearch/lrsnotes/Irish-health-expenditure---the-comparative-context.pdf

gradualincreaseinStatepensionagefrom65in2010to68in2028,itisestimatedthatthenumberofpersonsatStatepensionageandolderwillmorethandoublefrom586,000in2015,to1,402,000by2055.

Inaddition,Irelandalsohasaverylowlevelofprivatepensioncoverage,withapprox-imatelyonly35percentoftheprivatesector-employedpopulationcoveredbyasupplementarypension.Thissuggeststhatahighpercentageoftheworkingpopulationisnotsavingenough,orisnotsavingatall,forretirement,reflectingasignificantriskbothintermsofthefundingandsustain-abilityofpensionsinIreland.

Ariskalsoexistsinhowourworkplaceswilladaptandencourageolderpeopletocon-tinueparticipatingintheworkforce.Whilstasignificantnumberofpeoplefeelretire-mentcomestooearlyandwishtocontinuetowork,itislikelythatthiscohortmayrequirespecificassistanceoradaptations.Olderpeoplemaywishtoreducelevelsofresponsibilityorworkpatternsintheirroles,andthiswillrequirean“AgeFriendly”approachbyemployerstoutiliseandenablethiscohorteffectively.Employedpeopleover50arelesslikelytoavailoforhaveaccesstolifelonglearningopportunities;lessthanoneintenpeople(8.0percent)aged50+participateininformaleducationandtraining11.Reducedopportunitytomaintainandincreaseskillslevelswillalsoreducethelikelihoodofolderpeoplestay-ingintheworkforcebeyondthetraditionalretirementage.Whiletheemploymentrateforadultsaged50-64hasincreasedintheyears2014-2016,theemploymentratefor65+continuestobeeven12.

Thesignificantincreaseinthenumber

11 Healthy&PositiveAgeingInitiative–PositiveAgeingNationalIndicatorsReport(2016)

12 Healthy&PositiveAgeingInitiative–PositiveAgeingNationalIndicatorsReport(2016)

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ofhowbillionsofpeoplearoundtheglobeconnectandcommunicate.Whilesocialme-diaplatformsoffermanybenefits,therela-tivelackofoversightofbothsocialmediausersandtheirdatahasledtoagreaterriskofthespreadingofdisinformationorso-called‘fakenews’,withassociatedchalleng-esforandrisksaroundregulatorysystemsreadilyapparent.Thetargetingofsocialme-diauserswithpoliticaladvertisementsandsponsorednewsstoriestoinfluencetheirbeliefs,opinionsandpossiblyvotinginten-tions,forexample,isofconsiderablecon-cern.Balancedandrepresentativediscourseanddebateisvitaltoensuretheintegrityofanyreferendumorelectoralprocess.Thereisalsoariskthatthemultiplicityofinforma-tionplatformscouldleadtomorepolarisedsocietalviewpoints.

Large-scaledisinformation15or‘fakenews’campaignsspreadonlinebymaliciousactorsareahigh-riskissueforsocietyglobally,includingIreland.Thereisinternationalconsensusthattheriskofpublicharmissubstantialwhenonlinedisinformationisdesignedtoinfluencepublicdebateonpoliticalissuesandattempttoinfluenceormanipulatetheoutcomeofelectoralprocesses.Amajordriverofthisriskisthatlargenumbersofcitizensnowgettheirnewsfromsocialmediaplatforms;thishasclearimplicationsforthegenerationandpotentialimpactofonlinedisinformationandhowitisrapidlydisseminated.Resultsofa2018EurobarometerSurveyindicatethatlevelsofawarenessoftheriskarehighinIreland-81percentofIrishinternetuserswerefoundtobeconcernedaboutdisinformationormisinformationonline

15DisinformationisdefinedbytheEUas:“…Verifiablyfalseormisleadinginformationthatiscreated,presentedanddisseminatedforeconomicgainortointentionallydeceivethepublic,andmaycausepublicharm.Publicharmcomprisesthreatstodemocraticpoliticalandpolicy-makingprocessesaswellaspublicgoodssuchastheprotectionofEUcitizens’health,theenvironmentorsecurity.Disinformationdoesnotincludereportingerrors,satireandparody,

orclearlyidentifiedpartisannewsandcommentary.”

and75percentofhospitalbeddays.Inad-dition,thepopulationwithlifelongdisabilitywhoareageingisalsoincreasing,leadingtoadditionaldemandforresidentialcareplaces,andtoincreasingcomplexityandcostofcareforthosereceivingdisabilityservices14.Some60percentofthoseagedover50reporthavingatleastonechroniccondition.Thelevelofmulti-morbidityisincreasingwith18percentofadultsover50havingtwoormorechronicconditions.Itisestimatedthatwithinthenextdecade,thenumberofadultswithchronicdiseaseswillincreasebyaround40percent,withrelativelymoreoftheconditionsaffectingthoseintheolderagegroups.Theeconomicburdenofhealthcareexpenditureregardingchronicdiseasesisconsiderable,notonlyforthehealthsystembutalsointermsoffamiliesandsocietyasaresultofreducedincome,earlyretirement,anincreasedreli-anceonsocialcareandwelfaresupportanddiminishedproductivityandabsenteeism.

Atthesametime,therearedifficultiesattractingandretainingsuitablyqualifiedhealthcareworkerstomeetdemand.Ourworkforceisageing,with21percentaged55yearsorover.TheEuropeanCommissionhasestimatedapotentialshortfall,withintheEU,ofaround1millionhealthworkersby2020.Globaldevelopmentsintechnol-ogywillalsoimpactonourworkforcewithunpredictableconsequences,includingthepotentialfornewrolesandskilldevelop-mentbutalsotheautomationandredun-dancyofotherroles.

4.4. Impact of Social Media on Public Debate

Socialmediahasbecomeanintegralpart

14 WorkingGroup1,TransformingLives(2018)ReportonFutureNeedforDisabilityServices.DepartmentofHealth.https://health.gov.ie/wp-content/uploads/2018/06/Working-Group-1-Report-on-future-need-for-disability-services.pdf

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responsesarecomprehensive,continuouslyassessthephenomenonofdisinformation,andadjustpolicyobjectivesinlightofitsevolution.

RecognitionatanEUlevelofthesignif-icantthreatofonlinedisinformationtodemocracyisalsoclear,asevidencedbyvariouscountermeasuresbeingprogressed,includinganActionPlanagainstDisinfor-mation,launchedinDecember2018,whichsetsoutmeasurestotackledisinformationinacoordinatedapproachamongtheEUinstitutionsandincooperationwithMem-berStates.MeasuresincludeaRapidAlertSystem(RAS)–aninformation-sharingmechanismondisinformationactivities;anEU-widevoluntaryCodeofPracticeonDis-information;andsupportinganindependentnetworkoffact-checkers,medialiteracyinitiativesandtoolstopromotequalityjournalism.

Inthecontextofdataprotection,thedisclosureofharvestingofthird-partydataanditsuseintargetingcertaingroupsandcohorts,aswellasongoinginvestigationsandcommentaryinboththeUSandUKaroundelectionmanipulationbythirdpar-ties(includingforeignactors),underlinetheneedbothforgreaterprotectionofcitizens’privacyrights,andgreatertransparencyfromorganizationsonhowtheyareusinganypersonaldatatheycollect.TheGeneralDataProtectionRegulation(GDPR),whichcameintoeffectacrosstheEuropeanUnionin2018,isdesignedtoachievethesegoals.Inaddition,theDataProtectionAct2018includesaprovisiontolimitthescopeofanyprocessingofpersonaldatarevealingpoliticalopinionstopreventmisuse.

Thesewiderconcernsalsoraisebroad-erquestionsaroundthesustainabilityoftraditionalmedia,whichhavebeenviewedhithertoascustodiansofthepublicinterest,

duringthepre-electionperiod16.

Asignificantnumberofrecentelectioncam-paignsacrossEuropeandelsewherehavebeencharacterisedbysubstantivereportsofapparentdeliberateattemptstomanip-ulateoutcomesusingavarietyofdifferentmeansincludingonlinedisinformation.Incertainjurisdictions,officialinvestigationsintosuchallegedactivitiescontinuestobeongoing.

Irelandisalsovulnerabletothisrisk,aswasseen,forexample,duringthereferenduminMay2018ontheThirty-sixthAmendmentoftheConstitutionBill2018.TheTrans-parentReferendumInitiative(TRI)17builtapublic,searchabledatabaseofpoliticaladsbeingtargetedatIrishvotersrelatedtothereferendumandinformationonthesocialmediaaccountspromotingthem,andfoundthatadsfromuntraceablegroupswereusedto‘misleadvoters,discreditpoliticalfiguresandgroups,mimicofficialorneutralinfor-mationsources,gathervoterdataandsharedisturbingimages’.18InitsfirstpublishedRe-port,theInterdepartmentalGroup(IDG)ontheSecurityofIreland’sElectoralProcessandDisinformationfoundthatwhileriskstotheelectoralprocessinIrelandarerelative-lylow,takingintoaccountthemitigatingfactorsalreadyinplace,amoresubstantialriskisposedbythespreadofdisinforma-tiononlineandtheriskofcyber-attacksontheelectoralsystem.ThisisinlinewithEUfindingsandrecentinternationalexperi-ence.Giventherapidpaceoftechnologicalchange,itisthereforeimportantthatpolicy

16SpecialEurobarometer477DemocracyandElections,EuropeanUnion,2018.p.56;http://ec.europa.eu/commfrontoffice/publi-copinion/index.cfm/survey/getsurveydetail/instruments/special/surveyky/2198

17TheTRIisavolunteer-led,civicinitiativethatwasestablishedtoadvocateforincreasedtransparencyofdigitaladvertisingduringelectoralcampaignsinIreland.Seehttp://tref.ie/

18 PolicyProposalsforregulatingonlineadvertising-TransparentReferendumInitiative–June2018https://docs.google.com/docu-ment/d/1zGdjWuilY9gms7NkHjYRXyYbR7Vdn3OzBeCGrg8uRvQ/edit

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befurtherexacerbatedbytheroleofsocialmediainpublicdebate,discussedfurtherinSection6.3.Conversely,inthecontextofsocialmedia,thereispotentialforanin-creasingsenseofisolationandexclusionforthosewhomaynothavethenecessaryre-sourcesorskillsintermsofaccesstosocialmediaandservicesdeliveredonline,againwitharuraldimensionintheIrishcontext.

InIreland,taxationandsocialtransferpoli-cieshavebeeneffectiveinoffsettingmarketincomeinequality.In2017,transfersre-ducedtheat-risk-of-povertyratefrom32.3percentto15.7percent,apovertyreduc-tioneffectof51.4percent.IrelandisoneofthebestperformingEUmemberstatesinthisregard,underliningtheeffectivenessofsocialtransferpoliciesandtaxationinoffsettingincomeinequality21.Similarly,thequintileshareratio,i.e.theratiobetweentotalincomesreceivedbythetop20percentofearnerscomparedtothebottom20percentofearners,stoodat4.8in201722,slightlyabovethe2016figureof4.7.Thisfigureis,however,downfrom5.1in2012attheheightoftheeconomicdownturn.Inrecentyearstherehasbeensomeimprove-mentinmeasuresofpovertyandinequality,withtheGinicoefficient23fordisposablein-comefallingbelowtheEUaveragein2015,andfallingfurtherin2016to29.3(Figure1below).Nonetheless,measuresofconsistentpovertyremainedsubstantiallyabovethetargetssetfor2020anddespitetheconsid-erableimpactofsocialtransfersonpoverty,socialtransfersalonewillnotresolveissuesofincomedistributionandinequality.Migration,discussedinSection4.5below,

21 http://cso.ie/en/releasesandpublications/er/silc/surveyoninco-meandlivingconditions2016/

22 https://www.cso.ie/en/releasesandpublications/ep/p-silc/sur-veyonincomeandlivingconditionssilc2017/introductionandsummary-ofresults/

23 TheGinicoefficientmeasurestheextenttowhichthedistribu-tionofincomeamongindividualsorhouseholdswithinaneconomydeviatesfromaperfectlyequaldistribution.AGinicoefficientofzerorepresentsperfectequality.

andtheirrolebothinIrelandandglobally.Athriving,independentmediaisessentialtoahealthysociety,especiallyinthisincreasing-lyonlineera,whereriskstotraditionalprintmediaandtheiraudiencesandreadershiplevelsarebecomingincreasinglyapparent.

4.5. Social cohesion including Perceptions of Rural and Regional Imbalances

Themostrecentrecession,andtheconse-quentneedtostabilisethepublicfinanceshasraisedconcerns,airedinothercountriesalso,aboutincomedistributionandinequal-ity.AccordingtotheOECD,growingin-comeinequalitycanhaveanegativeeffectonsocialcohesionandimpedeeconomicgrowth19.TheOECDhassaidthateconomicrecoverysince2010intheOECDareahasnotledtoinclusivegrowth,andhasnotreversedthetrendofincreasingincomeinequality20.

Asdiscussedabove(Section2.3),theglobaltrendofrisingpopulismandanti-estab-lishmentsentiment,evidentinFrance,Poland,HungaryandAustriaamongoth-ers,isfurthercontributingtorisksaroundthiserosionofsocialcohesionandtrustininstitutions.Thisinternationalpopulismcanbeseenaspartlyrootedingreatdivides,suchasthosebasedonage,geographyandwealth,aswellasaphenomenonofincreas-ingurbanisation.

Inlinewithdevelopmentsinothercoun-tries,weareseeingincreasingperceptionsofregionalandruralimbalancesinIreland.Issuesarisingfromgrowinginequality,cou-pledwithariseinpopulismandperceptionsofregionalorgeographicdifferences,may

19 OECD(2015)InitTogether:WhyLessInequalityBenefitsAll(Paris:OECD).

20 OECDIncomeInequalityUpdate(Paris:OECD)http://www.oecd.org/social/OECD2016-Income-Inequality-Update.pdfb

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introducedtodealwiththisintheformoftheEmployment(MiscellaneousProvisions)Act201824.

Anotherconsequenceoftherecentre-cessioninIrelandwasadamagingeffectonpublictrust.TheOECDnotesthatthedeclineofpeople’strustininstitutionsintheaftermathoftheglobalfinancialcrisishasbeena“keypolicyconcern”inrecentyears.Furthermore,lowerpublictrustininstitutionslimitsthecapacityofGovern-mentstoimplementtheirpolicies,andhasbeenlinkedtoincreasingdissatisfactionwithdemocracy.25Thereportalsoreflectstheextenttowhichthepopulationfeelsithasasayinwhatgovernmentdoes.Accord-ingtothereport,IrelandisbelowtheOECDaverageintermsofthepercentageoftheworking-agepopulationwhofeelthattheyhaveasayinwhatthegovernmentdoes26. The2019EdelmanIrelandTrustBarome-

24 TheEmployment(MiscellaneousProvisions)Act2018wassignedintolawon25December2018.

25 OECDHow’sLife2017https://read.oecd-ilibrary.org/economics/how-s-life-2017_how_life-2017-en#page186

26 OECDHow’sLife2017https://read.oecd-ilibrary.org/economics/how-s-life-2017_how_life-2017-en#page185

canbeanotherfactorandpotentialchal-lengeconcerningtheerosionofsocialcohe-sion.ThecontinuedsuccessfulintegrationofsecondandthirdgenerationimmigrantsinIrelandwillbeimportantinensuringthatriskdoesnotmaterialiseinanIrishcontext.Socialgroupsthatcontinuetobedispropor-tionatelyaffectedbypovertyincludejoblesshouseholds,thoselivinginsocialhousing(oftenassociatedwithspatialconcentrations)andlone-parenthouseholds(mainlyfe-male-headed)acrossthelifecycle,withchil-drenmorelikelytobeinpovertythanadults.Eurofound,OECD,ILO,NESCandtheESRIhaveallcommentedonthefactthattherouteoutofsocialexclusionispromotionforindividualstobeinwork,andthatenhancedtrainingandeducationcanbebeneficialinachievingthis.Althoughthelabourmarkethasseensignificantrecoveryinrecentyears,riskspersistinthisareaintermsofaccesstoandthequalityofwork.Accesstostableemploymentcontinuestobeachallenge,inparticularforyoungpeople,andtheuseoftemporaryandprecariousemploymentpracticesbyindustryalsocontinuestobeaconcern,althoughlegislationhasbeen

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Figure 1: Gini coefficient Ireland versus EU, 2010-2016

Source:Eurostat

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riskofreducedsocialcohesion.Inlinewithdevelopmentsinothercountries,forex-ampleincludingBrexit-relateddiscourseintheUK,andsimilartrendsintheUS,publicdiscourseinIrelandexhibitssignsthatthisperceptionexists,andthisriskmustthere-forebemanagedandmitigatedbyincreas-ingpublicawarenessthroughclear,positive,andevidence-basedmessaging.

Inaddition,andasmentionedaboveintheEconomicRiskssection,inthecontextoftheeconomicimpactsofBrexit,weknowthatsomesectorswillbeharderhitthanothers,andthatforthesesectors–theagri-foodandfisheries,andindigenousmanu-facturingsectors–theirregionalspreadismoreconcentratedinruralregions,whichhavehadacomparativelyslowerpost-crisisrecoverythantheDublinregion.Asdis-cussedinSection6.2onDisruptiveTech-nologies,astudybytheESRIfoundthatataregionallevel,Dublinistheregionatleastriskfromautomation(2percentathighrisk,mainlyinRetailandHospitalitysectors),whiletheMidlandsregion(5percentathighriskand64percentatmediumrisk)andBorderregion(5percentathighriskand62percentatmediumrisk)aretheregions’mostatrisk.Inaddition,actionsneededtotackleclimatechangecouldpotentiallyimpactmoreadverselyonruralandregionalareasoverthecomingyears.ThedifferinglevelsofimpactfromBrexit,ClimateChange,andotherrisksonregional,ruralandGaeltachtareas,mustthereforeremaintotheforefrontaswetacklethesechallenges.

4.6. Migration and integration

Migrationhasbecomeoneofthemostcontentiousandcontestedissuesinpoliticaldebatesacrossmanycountriesinrecentyears.ItplayedasignificantroleintheUK’s

terfindsthatthemediaistheleasttrustedinstitutioninIreland,mainlydrivenbyadistrustinsocialmedia(27percent)ratherthantraditionalmedia(67percent),how-evertrusthasrisenslightlysince2018.ThemosttrustedinstitutionsinIrelandareNGOs,whichalsosawamodestriseintrustsince2018.Globally,trustinemployershasrisento75percent,whichissharedbyIrishrespondentstothesurveyas69percentofIrishemployeeshavetrustintheiremploy-er.WhiletrustinGovernment,themedia,andNGOsrosebetween2018and2019,trustinbusinessdecreasedmarginally,andIrelandisamong20ofthe28countriessurveyedwhodisplayedoveralldistrustininstitutions.TheTrustBarometeralsohigh-lightsthat64percentofpeoplesurveyedinIrelandareworriedaboutfakenewsbeingusedasaweapon.Overall,theEdelmanreportnotesthatdistrustisatarecordhighglobally27.

Asmentioned,thereisanincreasedrisktosocialcohesion,andofunderminingtheworkdoneinrecentyearsinthisarea,shouldperceptionsofruralandregionalimbalancepersistorincrease.Inagrowingeconomy,therecanbeaperceptionthatruralandregionalareasarenotbenefittingequallyfromtheeconomicprosperitytakingplace,includingjobcreation.Therecanbeaperceptionofafocusonjobcreationwithincertaincities,andthereforethattherecoveryandbenefitismoreurbancentric,withinvestmentinlargerinfrastructureprojectslocatedintheseurbanareas,tothedetrimentofruralcommunities.Whetherthisperceptionisarealitycanbechal-lengedbyevidence.However,thepercep-tionitself,whichcanbestronglyfelt,canleadtoareducedconfidenceofruralandregionaldwellersandentrepreneurs,andcanthereforecontributetoanincreased

27 Edelman2019TrustBarometerhttps://www.edelman.com/sites/g/files/aatuss191/files/2019-02/2019_Edelman_Trust_Barom-eter_Global_Report_2.pdf

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referendumonBrexit,ithasfuelledtheriseofextremenationalistpoliticalpartiesinsomecountriesandithascausedothercountriestore-establishsomeformofbor-dercontrolswithinEurope.EventhoughIre-land’slocationinEuropemeansthattodateithasnotfeltadirectimpactfrommanyofthesepressures,thisshouldnotinducecomplacencyabouttheissuesthatmigra-tionandintegrationcangenerate,particu-larlyinthecontextofcontinuingpressuresfromtheMediterraneanandAfrica,andthesheervolumesseekingtomigrateintotheEU.

Inaddition,asmentionedinSection1.1above,BrexitintroducesnewpotentialrisksaroundimmigrationincludinganincreaseinillegalmovementofthirdcountrynationalsintoIrelandfromtheUK,aswellaslegaldivergencepossibilitiesregardingasylummatters.AsBrexitevolvestheremayalsobesignificantlabourmarketimplicationsforIreland.Togiveoneexample,theexpansionoftheconstructionsectorinIrelandmayat-tractmanyEasternEuropeanConstructionworkerscurrentlybasedintheUK.ThishasbothpositiveandnegativeimplicationsforIreland,dependingonthescaleofimmigra-tionofsuchworkersfromtheUK.

Intermsofinternalintegrationrisks,Irelandhaschangedfromanethnicallyhomoge-neoussocietytoamuchmoremulti-ethniconeinslightlyoverageneration,atrans-formationreflectedinruralaswellasurbancommunities.Census2016showsthat810,406peopleor17.3percentofthepopulationwerebornoutsidetheState(thisfigureincludespeopleofIrishnationalitywhowerebornoutsidetheState,includ-inginNorthernIreland),andthat535,475peopleor11.6percentofthepopulation-donotholdIrishnationality28.Whilethis

28 CentralStatisticsOffice(2016)Census2016SummaryResults–Part1(Dublin:CSO).

representsasmalldecreaseonthe2011Census29,itrepresentsanincreaseofalmost139percentinthenumberofpeoplewithoutIrishnationalitysince2002,thefirsttimetheCensusincludedaquestiononnationality30.

Thisbringswithitaneedtoberesponsivetothechangingnatureofsociety,forexam-pleintermsoftheneedsofanowmultilin-gualsocietyandthepotentialforlanguagetobecomeabarrierinaccessingGovern-mentcommunicationsandservices.

Structuralrisks,includingbarrierstomi-grantsaccessingemploymentorprogress-ingwithintheworkplace,therebycreatingpotentialsocialexclusion,andincreasedincidencesofracismagainstmigrantcom-munities,havebeenidentifiedbynumeroussources.TheseincludereportsbytheEco-nomicandSocialResearchInstitute(ESRI)andtheEuropeanAgencyforFundamentalHumanRights(FRA),theMigrantIntegra-tionStrategyMonitoringandCoordinationCommittee,GovernmentDepartmentsandstakeholders.IrelandhasaMigrantInte-grationStrategy(2017-2020),ledbytheDepartmentofJusticeandEquality,whichdefinestheactionstobetakenonintegra-tionduringthatperiod.

TheincreaseintheimmigrantpopulationinIrelandhashappenedinaveryshorttimeandwithoutanyoftheupheavalthathasoccurredinothercountrieswithsuchdra-maticmovementsofthepopulation.Failuretomaintainthislevelofcohesion,especiallyassecondandthirdgenerationmigrantcommunitiesemerge,representsasignicantriskofnegativeconsequencessimilartothoseexperiencedbyothercountries.

29 The2011Censusshowedthat544,357people,or12percentofthepopulation,didnothaveIrishnationality

30 Inthe2002Census,224,261peoplewererecordedasnothavingIrishnationality.

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5. Environmental Risks

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5.1. Climate Change & Biodiversity 5.2. Ensuring an affordable, sustainable and diverse energy supply 5.3. Delivery of Public Infrastructure 5.4. Food safety 5.5. Supply and Affordability of Housing

5.1. Climate Change & Biodiversity

ObservationsshowthatIreland’sclimateischangingandtheobservedscaleandrateofchangeisconsistentwithregionalandglobaltrends.ThemostimmediateriskstoIrelandwhichcanbeinfluencedbyclimatechangearepredominantlythoseassociatedwithchangesinextremes,suchasfloods,precipitationandstorms.However,futureimpactsofclimatechangearealsopredictedtoincludesealevelrise;watershortagesinsummer;wildfires;andadverseimpactsonwaterquality.Indeed,sealevelriseisalreadybeingobservedandisprojectedtocontinuetoriseintothefuture,whichwillincreasebothfloodanderosionrisktoourcoastalcommunitiesandinfrastructuralassets,aswellasthreatencoastalsqueezeofinter-tidalhabitats.Inaddition,itisprojectedthatthenumberofheavyrainfalldaysperyearmayincrease,whichcouldleadtoanincreaseinfloodingincidents.Someeffectsofclimatechangeareinevitableandincreasedsevereweatherposesarisktolives,livelihoods,prop-ertyandenvironments.Itwillbevitaltotakeprudentprecautionarystepsnowtobuildre-silienceintooursocietyandsystems,shoreupvulnerabilitiesanddevelopstrategiestocopewithconditionsthatmayariseinthefuture.

TherearesignificantthreatstoIreland’sbiodiversity,withtheBiodiversityIndicatorSurveyfor2017statingthat91percentofourhabitatsdesignatedunderEUlaware

“inadequate”orof“bad”status1,andtrendsinthestatusofthreatenedspecies,insectsandbirdsallregisteringasatintermediaterisk.Headlineresultsfromthe2018Liv-ingPlanetReport,publishedbytheWorldWildlifeFund,revealthatEarthiscurrentlylosingbiodiversityatarateseenonlyduringmassextinctions.Amorerecentbiodiver-sityreportfromtheUN,publishedinMay2019,outlinedtheimpactofhumansonnatureandfoundthatnearlyonemillionspeciesisatriskofbecomingextinctwithindecades,anditnotedthatcurrenteffortstoconservetheearth’sresourceswilllikelyfailwithoutradicalaction2.ThisrequiresIre-landtodevelopacomprehensiveseriesofmeasurestomaintainandwherenecessaryrestorethesehabitats.AsaPartytotheUNConventiononBiologicalDiversity,IrelandisalsocommittedtoprepareActionPlanstowardstheachievementoftheConven-tion’stargets.ImplementationoftheNa-tionalBiodiversityPlan(2017-2021)willbeafundamentalpartoftacklingtheserisks,andtheNationalDevelopmentPlanalsorecognisestheneedforincreasedfundingforbiodiversity.

Irishbiodiversityishighlyvulnerabletotheimpactsofclimatechangeandhasalowadaptivecapacitycomparedtoothervulnerablesectors.ClimatechangehasmajorindirectimpactsonIrishbiodiversity

1 https://indicators.biodiversityireland.ie/

2 https://www.un.org/sustainabledevelopment/blog/2019/05/na-ture-decline-unprecedented-report/

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throughitsinteractionwithotherstressors,inparticularhabitatfragmentationandloss;over-exploitation;pollutionofair,waterandsoil;andspreadofinvasivespecies.

IntermsofClimateChangeMitigation,thereisaneconomicrationalefortakingearlyactiontomitigategreenhousegas(GHG)emissions,investinrenewableenergy,improveenergyefficiencyandimplementadaptationmeasurestotheeffectsofclimatechange.Thecostofinactionexceedsthecostofactionandthiscostdifferentialwillrisesteeplywithtime.Itwillbecriticaltotakeactiononclimatechange,assetoutintheNationalDevelop-mentPlan,theNationalAdaptationFrame-workandthenewAllofGovernmentPlanonClimateDisruption,toavoidthreatstohumanhealth,economicdevelopment,property,in-frastructureandecosystems,aswellasrepu-tationaldamage.

PotentialcoststotheexchequerincludethoseassociatedwithnotachievingcompliancewithourEUGHGemissionsandrenewableenergytargetsto2020and2030.Thereisarangeofeconomicrisksassociatedwithfailingtopricethecostofcarbonintooureconomicmodel.Providingappropriatelong-termpricesignalsonthecostofcarbonwillbeimport-antinordertoinformmediumtolongterminvestmentdecisionsintheprivatesectorandtoencouragebehaviouralchangeinbroadersociety.Itwillalsobecriticaltodefineourap-proachtocarbonneutralityfortheagriculturesectorinawaythatfurtherstheachievementofourclimatetargetsanddecarbonisationgoalswhilerespectingsustainablefoodsecu-rityandtomakeinvestmentstodevelopnewandinnovativeeconomicopportunities,forexampleinthebioeconomy.Diversificationofagri-businesswillbecrucialtomaintainingcompetitivenessinthelowcarboneconomyandcreatingviableeconomicopportunitiesforruralIreland.Anassociatedriskisthemismanagementandover-exploitationofour

bio-resources,andeffectivestewardshipwillberequiredtoensuretheintegrityofournaturalresources.

Aswetransitiontoalowcarboneconomyandtraditionalindustriesandpracticesaredisrupted,decouplingoureconomicgrowthfromcarbonemissionswillbecomeincreas-inglycriticalinmaintainingourcompetitive-ness.Itwillalsobeimportanttoplanforthesocietaldisruptioncausedbythistransitionandprepareretrainingandreskillingoppor-tunitiestoensureindividualsandcommuni-tiescanmakethenecessarychanges.

Arelatedriskisfailingtoplanforsuccessandeconomicgrowthinthiscontext.Ire-land’sgreenreputationcouldalsobeim-pactedbyaclimate-changerelateddegra-dationinthequalityofournaturalenvironment.

Bothpoliticalandsocietalwillingnesstotacklethelonger-termrisksofclimatechangecouldpresentachallenge,assignifi-cantup-frontinvestmentisrequired,whichmaynotyieldbenefitsformanydecades.Fundamentalbehaviouralchangewillbenecessaryinthisregard,fromthepublicandprivatesectorsaswellasthegeneralpub-lic,giventhatoureffortstotackleclimatechangeeffectivelyarepredicatedonsignifi-cantbuy-infromthesegroups.EngagementwiththesegroupscanbefacilitatedthroughinitiativessuchastheNationalDialogueonClimateAction.

5.2. Ensuring an affordable, sustainable and diverse energy supply

Ireland’ssituationasanislandontheperipheryofEuroperendersitparticularlyvulnerabletodisruptionstothesupplyorpriceofoil,gasorelectricitywhichwould

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havesignificanteconomic,socialandcompet-itiveimpacts.Suchdisruptioncouldarisefromnaturaldisaster,economictrendsorgeopo-liticalchange,suchasBrexit,disruptiontooilsuppliesintheMiddleEast,RussiansanctionimpactsongassuppliesandOPECcuts.

BrexitposesaparticularriskasIrelandimportsthevastmajorityofitsenergyrequirements,oil,gasandtransportfuels,fromorviatheUK.ThepotentialimpactofBrexitontheSingleElectricityMarketisalsoofparticularnote.Thisprovidesanaddedimpetustoincreasetheuseofourrenewableresourcesandtodiversifyoursourcesofsupplybydevelopingfurtherelectricityinterconnectiontoneigh-bouringmarketsincludingFrance.

AsIrelandelectrifiesvitalservices,suchastransportandheating,whichwillbenecessarytomeetclimatechangeobligations,thechal-lenges,developmentcostsandrisksaroundenergysecuritywillcontinuetoshiftandevolve.Withenergydemandincreasingfromagrowingpopulationandeconomy,thereisarealneedtoensurethatwecanbuildsocietalsupportandacceptancetodevelopappro-priatelevelsofinfrastructuretoservicethisgrowth.

AlargeproportionofIreland’senergyneedsaremetthroughimports-circa66percentin2017.However,itisworthnotingthatindig-enousenergyproductionisincreasing-from12percentofthetotalprimaryenergysupplyin2015to34percentin2016.ThisisinpartduetothecomingonstreamofnaturalgasproductionfromtheCorribproject.Increasinglevelsofrenewableenergywillhelpoffsetourdependencyonimportedfossilfuels,intro-ducemorecertaintyintheenergyfuelmixandmoveIrelandtowarditsfuturerenewableen-ergytargetsassetoutintheNationalEnergyandClimatePlan(NECP).

Ensuringanenergysupplythatisnotonly

affordable,sustainableanddiversebutalsosecurewillbeextremelyimportantaspres-sureincreasesontheworld’sresourcesduetoclimatechangeandincreasedenviron-mentalconcerns.Therearealsogeopoliticalimplicationscontributingtothisrisk,withinternationalrelationsandtensions,includ-ingincreasedpressureonglobalfreetradeagreements,creatingdoubtoverthesecuri-tyandpriceofenergysupply.

Inthelastfewyears,thepriceoffossilfuels,particularlyoil,havebeenmorevolatile,withinternationalpricesbeginningtoriseafteraperiodofsustainedlowprices.Thishasbeenpassedthroughtotheconsumerwithpriceincreasesevidentinthegas,elec-tricityandtransportfuelsectors.

5.3. Delivery of Public Infrastructure

IrelandwasagainthefastestgrowingeconomyintheEUin20183,anditspopu-lationiscontinuingtogrow,expandingby3.8percentovertheinter-censalperiod2011-2016.Thiscontext,coupledwithanunder-supplyofhousingandassociatedaf-fordabilityissues,atighteninglabourmarketandthecontinuedstrengthofeconomicgrowth,couldgiverisetooverheatingintheeconomy(seeSection2.4formoredis-cussiononrisksaroundoverheating).ThisbringswithittheriskofnegativeimpactsforIreland’scompetitivenessandvalueformoneyconcernsfortheStateintermsofcapitalprogrammes,aswellasfortheindi-vidualconsumer.

Followingasignificantreductioninpubliccapitalexpenditureoverthecourseoftherecession,thelevelofcapitalexpenditurehasincreasedastheeconomyhasreturned

3 OnthebasisofGDP;https://www.cso.ie/en/releasesandpublica-tions/er/na/quarterlynationalaccountsquarter42018/

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togrowth,andthepublicfinancesrecovered.However,whileProjectIreland2040waslaunchedinFebruary2018,andsetoutboththe20-yearNationalPlanningFramework2040andadetailedcapitalinvestmentplanfortheperiod2018to2027(theNationalDevelopmentPlan2018-2027),risksaroundcapacityconstraintswhichcouldprovechal-lengingforitsfullimplementationareappar-ent.Inparticular,risksintermsofbothinsti-tutionalcapacityandcapacityintheeconomyincludingskillsconstraintscanbeseen,withskillsconstraintsparticularlyevidentintheconstructionsector,aswellasconcernsregardingsupplychaincapacityinthesector.Thesechallengescouldhindertheimplemen-tationanddeliveryofprojectsundertheNDPandNPF,withtheassociatedriskofcontrib-utingtopriceinflationiftheseconstraintsarenotalleviatedinordertoensureinfrastructureconstraintsaredealtwithinasustainableway4.AsmentionedaboveinSection3.2,theimpactofconstructioncostinflationonthedeliveryofmajorinfrastructureprojectsisalsoarisk.

By2040anadditionalonemillionpeoplewillliveinIreland,almostaquarterofwhomwillbeover65(doublethecurrentlevels).Anadditionaltwo-thirdsofamillionpeoplewillworkhere,andanadditionalhalfamillionhomeswillbeneededtoaccommodatethisgrowth.

Aplan-ledapproachtoinfrastructuralinvest-mentisthereforevital.Historically,constraintsonpublicfinancesandamarket-anddevel-oper-drivendevelopmentenvironmenthasresultedininfrastructurefollowing,ratherthandriving,changeanddevelopmentforthebenefitofsociety.Failingtorenewanden-hanceourinfrastructuralcapabilitiesthroughastrategicplanwillimpactoncompetitiveness,

4 Inresponse,theGovernmenthasestablishedtheConstructionSectorGroupwhichwillleadthedevelopmentofpoliciesandindustrypracticeswhichcandriveanimprovementinproductivity,attractyoungpeopletopursuecareersintheconstructionsectorandhelptheindustrybecomemoreenvironmentallysustainable.

qualityoflifeandourabilitytomeetnewenvironmentalchallenges.

Preparingforandmanagingprogressiveandsustainablegrowthrequirescarefulpreparationandplanningforallregions.Inaddition,decouplinggrowthfromaddingtoenvironmentalpressuressuchasclimatechangeanddecliningbiodiversityiscritical.Inresponse,theNationalPlanningFrame-workwasdevelopedinparallelwiththeNationalDevelopmentPlan.Thestrategiescombinetopresentamapforeffectivespatialplanningandstrategicinvestmentininfrastructure,whichwillallowIrelandtoaccommodateanticipatedpopulationgrowthwhileensuringgrowthcontinuesinabalancedway.

TherisksandimplicationsofnotdeliveringontheobjectivesinProjectIreland2040areclear.Thedeliveryandmaintenanceofcompetitively-pricedworld-classinfrastruc-ture(e.g.energy;telecoms;transport;waterandenvironmentalservices)andrelatedser-vicesiscriticaltobolstercompetitiveness,whichinturndeterminesthesustainabilityoflivingstandards.Inadditiontothecapac-ityandskillsconstraintsoutlinedabove,theNationalCompetitivenessCouncil(NCC)quotesIMFestimateswhichshowthatanincreaseof1percentagepointofGDPininvestmentspendingcanincreaseoutputbyapproximately0.4percentinthesameyearandby1.5percentfouryearsafterthein-creaseininvestment.5Overall,indeliveringupontheobjectivesofProjectIreland2040,itisimportanttoensurethatefficiency,effectivenessandvalueformoneycontinuetobeatthecentreofprogrammeandproj-ectimplementation.

Theabilityofthepublicservicetodeliv-erinfrastructureprojectsontimeandon

5 NationalCompetitivenessCouncil(2017)Ireland’sCompetitive-nessChallenge,availableat:https://dbei.gov.ie/en/Publications/Pub-lication-files/Irelands-Competitiveness-Challenge-2017.pdf

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budgetiscritical.WhileIrelandhasmademuchprogressindeliveringprojectsontimeandwithinbudgetoverrecentyears6,withprojectscominginonbudgetacrossmostsectors,itisclearthattherecentexperienceofcertainprojects,suchastheNationalChildren’sHospital,exceedingtheirinitialcostestimatesmustbedrawnupon,andlessonslearned,toensurethatthisriskisavoidedinfuture.Arangeofreformsarethereforebeingprogressed,includingtherevisionofthePublicSpendingCodeandthedevelopmentofthenextgenerationoftheCapitalWorksManage-mentFramework7intheOfficeofGovernmentProcurementtoensurebetterprojectappraisalmechanisms,thedeploymentofstrongercom-mercialskillsinthedeliveryofprojectsandbetterestimationandmanagementofprojectcosts.

Furthermore,inadditiontopotentialriskstocross-borderinfrastructureprojectsinthecontextofBrexit,impactsonroadinfra-structurefromanincreaseinsevereweatherevents,andunforeseenbudgetarypressuresonplannedcapitalfundingoverthecourseofProjectIreland2040,asignificantthreattodeliveryofProjectIreland2040isrisinglevelsoflitigationleadingtodelaysininfrastructuredelivery.Thereisalsoariskthatthegrowinginfluenceofsocialmediamaybecomearele-vantfactorinthecontextofoppositionofcit-izensandcommunitiestotheimplementationofinfrastructureprojects.Widercommunitieshaveinsomecasesopposedprojectsdespiterigorousplanning,environmentalassess-mentandconsultationprocesses.Enhanced

6Inparticular,recentyearshaveseenmajorprogressintheprofession-alismofprojectmanagementinthewatersector,motorwaysandpublictransportarea,withanormnowwell-establishedthatallsuchprojectsshouldcomeinontimeandonbudget.Reformsarecurrentlybeingdevelopedwhicharedesignedtoextendthesamelevelsofdiscipline,professionalismandperformanceacrossthepubliccapitalprogrammemorebroadly.

7 TheCapitalWorksManagementFramework(CWMF)isastructurethathasbeendevelopedtodelivertheGovernment’sobjectivesinrelationtopublicsectorconstructionprocurementreform.Itconsistsofasuiteofbestpracticeguidance,standardcontractsandgenerictemplatedocuments.Allthedocumentsthatmakeuptheframeworkareavailableonline.

mechanismstocreatebettercommunityownershipofandparticipationinrequiredinvestmentprojectsmaygosomewaytomitigatingthisoppositionbyallowingthosemostaffectedtobenefitmoredirectlyfromthedevelopmentofsuchinfrastructure.Ireland’sdevelopmentconsentsystemsneedtoberobustandefficienttomaximisecertaintyandminimisedelayinconvertingcapitaltoprojectsthatdeliver.

5.4. Food safety Potentialrisksaroundfoodsafetyandani-maldiseaseclearlyrepresentbothahumanhealthriskand,asaconsequenceofthat,riskstointernationaltradeinIrishfood.Ourfoodsafetyandproductionstandards,whichincludeafavourableanimalhealthandwelfarestatus,areimportanttoconsumerconfidenceinIrishfoodanddrinkproductsbothathomeandabroad.Whilethepossibilityoffoodcontaminationoranoutbreakoffood-bornehumanillnessclear-lyrepresentsarisktothehealthofcitizens,afoodsafetyincidentofIrishoriginoramajordiseaseoutbreakinfarmedanimalsinIrelandcouldalsojeopardiseinternationaltradeinIrishfood.

Anysuchadverseincidentcouldleadtoim-mediateexclusionfromcertainmarketsanditcouldtakeaconsiderableperiodoftimetorecoverconsumerconfidenceandmar-ketshare.Giventhevitalimportanceoftheagri-foodsector,anditshighdependenceonexports,thiswouldleadtosignificantimplicationsfortheIrisheconomy,partic-ularlyinruralareas.Theagri-foodsectorishighlyexportdependent.In2018,thevalueofagri-foodexportswasover€13.7billion,representingagrowthof74percentsince2009.41percentor€5.55billionofthisisexportedtotheUK,leavingthesectorpar-ticularlyexposedtorisksrelatedtoBrexit.

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5.5. Supply and Affordability of Housing

Oneofthemostcriticalchallengescurrent-lyfacingtheStateisthesupplyofhousing.Housingsupply,bothsocialandprivate,isessentialforsocietalwell-beingandeconomicgrowth.However,housingandrelatedmar-ketshavedisplayedmarkedvolatilityinrecentdecades,includingthepricecorrectionduringtherecessionyears,whichactedasasevereshocktotheconstructionsector,inadditiontowiderfiscal,consumption,creditmarketandothermacro-economicimpacts.

Thishasnegativelyaffectedthecountrybothsociallyandeconomicallywithchallengesintheprovisionofsocialhousinginthefaceofincreaseddemand,lackofaffordabilityforthoseonaverageincomes,anincreaseinhomelessness,andconstraintsoncompeti-tiveness.

Underlyinghousingdemandhasoutpacedactualsupplyinrecentyears,manifestinginstrongergrowthinhousepricesandrents,withsuchincreasesbeingrapidinDublinandotherurbanareascomparedwiththerestofthecountry.HousingundersupplyhasbeencompoundedbytherapidgrowthoftheIrisheconomyinrecentyearsresultinginafford-abilityissuesandrentalpropertypricesrisingabovetheirpreviouspeaks.

Thelackofaffordableaccommodationhastranslatedtorisinglevelsofhomelessness,withsignificantsocialandfinancialcosts.Inadditiontotheincreasednumberofroughsleepersrecordedinrecentyears,homelessfamilieshavebeenlivingforlongperiodsoftimeinemergencyaccommodationwithconsiderableimpactsonfamilylife.Difficultiesaccessingaffordableaccommodationareamajorsourceofconcernformanypeople.

Thereisnowagrowingriskaroundtheissueofaffordabilityas,evenassupplyin-creases,affordabilitypressurespersist.ThisisofparticularconcerninIreland’scities.Thesepressuresmayfurtherexacerbatealreadyincreasingwagepressures,whichmaythenleadtoafurtherincreaseinhouseprices,whichcouldinturnresultincon-tinuingaffordabilitychallenges.Intermsofincreasingwagepressuresfromthepublicsector,suchrisksarelinkedwithincreasingexpectationsforpublicexpenditure,whichisdiscussedaboveinSection4.3.

Collectively,thesechallengespresentarisktothecontinuedrelativecompetitivenessoftheeconomy,withpotentiallyadverseimpactsonIreland’sabilitytocontinuetoattractForeignDirectInvestment(FDI),asavailabilityofhousingisafundamentalcon-cernforlargemulti-nationalsconsideringlocatinghere.

Currently,pressuresonthehousingmar-kethaveledtoovercrowdingandloweringofqualityoflife.Theimmediatetaskistomoderatepricemovementsandimproveaffordabilityinrentalandpurchasemarketsbyencouraginggreatersupplyofhousingintherightlocationsandincreasingthesupplyofsocialhousinginaplannedandsustain-ablemanner.

Increasingsupplytomeetdemandalsocar-rieswithitrisksfortheconstructionindus-tryandcreditsector,whichisundergoingalengthyandasyetunfinishedrecovery.Alonger-termtaskistodampenvolatilityandsuppressthecyclicalnatureofhousingmarkets,sothatwehaveahousingsysteminwhichrealhousepricegrowth(andrents)donotdeviateforlengthyperiodsfromrealeconomicgrowth.

WhiletheCSOstatisticsfor2018showthatsupplyofhousingisincreasinginline

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withthegoalsundertheGovernment’sRebuildingIrelandprogramme8,andthereisstronggrowthinthesupplyofsocialhousingbylocalauthorities,overallhousingdemandisincreasingtoo,andinthecomingyearshousingshortagesarelikelytoactasaconstraintoneconomicactivityandcom-petitiveness,andreflectoneofthemostprominentrisksandchallengesfacingthecountry.

ThepotentialeffectsofBrexit9,inwhat-everformitoccurs,arealsolikelytohaveanimpact,withrisksincludingconstraintsontheavailabilityofconstructionmateri-als,impactsonavailabilityofconstructionworkers,impactsonconstructiontimelinesandpotentiallyahigherdemandforhous-ing.TheDepartmentofHousing,Planning&LocalGovernmentcontinuestomonitorthesituationinthisregardandcontinuetopreparetomitigatetheeffectsofBrexit.

8 http://rebuildingireland.ie/

9https://data.oireachtas.ie/ie/oireachtas/committee/dail/32/joint_committee_on_housing_planning_and_local_government/re-ports/2019/2019-02-07_examining-the-potential-impacts-of-brex-it-on-ireland-s-housing-market_en.pdf

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6.1. Cyber Security 6.2. Disruptive technology trends 6.3. Anti-Microbial Resistance 6.4. Major Pandemics 6.5. Nuclear contamination

6.1. Cyber Security Disruption to critical information infrastructure

Cybersecuritymattersbecausetheextenttowhichsocietyreliesondigitaltechnologyisnowsoall-encompassingthatthistechnologycannolongerbeviewedasbeingataremovefromeverydaylife.Almostallaspectsofourliveshaveadigitaldimension,andtheubiquityofconnecteddevices-the“InternetofThings”(IoT)-hasbroughttrulymassivebenefitstooursocietybuthasalsoopenedupvariousnewandunpredictablethreatvectors,andawiderangeofsignificantrisksformajorna-tionalinfrastructureincludingenergy,trans-port,telecomssystemsandfinancialsystems.WithIrelandpositioningitselfasatechno-logicalsocietywithagrowingdependenceononlineservices1,theimpactofanattackorincidentontheprovisionofservices,andonthereputationofbusinessesandthepublicserviceissignificant.

Europolcurrentlyjudgestheriskofcyber-ter-rorismtobeoneofhighpotentialbutlowprobability,thoughtheprobabilitymaybeincreasing.ThisisanissueofgrowingconcernatEUandinternationallevelsreflectingtheimportanceofcontinuingtobuildourexper-tiseandcapacityincybersecuritytoenableustoidentifythesethreatseffectively.

1 Suchasbuild-to-shareandfinancialmanagementSharedServicesprojectswhichrequirenetworkconnectivity,andcloud-basedserviceswhichrequireconnectivityfromanexternalprovider

Inaddition,criminalenterprisesoperatingindifferentpartsoftheworldhavegrowingcapabilitiesintermsoflaunchingdisruptivecyber-attacksandalsoholdingentitiestoransomwheretheysucceedinencryptingbusinessandpersonaldata.Tworecentincidentshighlightthecontinuedthreatofcyber-attacks.OnaEuropeanfront,thedataofhundredsofGermanpoliticianswasleakedfromregional,nationalandEuropeanparliamentsattheendof2018.Thiscameonfootofalonglineofpreviousattacksonpoliticians,militariesandseveralembassies.Morelocally,thedataofalmost3,500usersoftheLuaswebsitewashackedatthebe-ginningof2019.AccordingtotheEuropeanUnionAgencyforNetworkandInformationSecurity(ENISA)ThreatLandscapeReportfor2018,thethreatofmalwarecontinuesasthetopcyberthreat,withthethreatofweb-basedattacksandphishingincreasing.Thisindicatesthatthethreatofphishingat-tacks,andotherattacks,maybecomemorefocussed,personalisedandstrategicallytargeted.

ThepossibilityofsuchattacksareincreasedbyrisksincludingtheriseofArtificialIn-telligence(AI)inthecontextofopenplat-formswhichhaveputthesesystemsintothehandsofeveryone,includingmaliciousactors;therisksaroundcriminalsandexter-nalattackersby-passingsecuritymeasuresbyattackingtheauthorisedusersofthesystems;andrisksthroughpersonaltech-nology,i.e.asdevicesbecomemoreuseful

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forusersweriskexposuretoriskthroughtheirowndevicesinteractingwithoursystems.

Theriskoffurtherattackscontinues,attackswhichcouldhaveseriouseffectsontheeconomyandonthecohesionofsocietyingeneral2.Thepotentialimpactontheprovisionofserviceshasthepotentialtoleadtocivilunrestinadditiontosignificantdisruptionforcitizens3,whileprolongedorrepeatedinci-dentsriskcreatingabacklashagainstdigiti-zation,withfurthereconomicconsequencesandreputationaldamagetobusinessesandthepublicservice.RelatedtothisistheriskofCyber-activismwherecivilunrestorprotestisexpressedthroughdisruptivepracticesonpublicbodiesorcriticalinfrastructure.

Cyberspaceisanintegralpartoftherules-basedinternationalorder.Thebestguaranteeforafuturewithanopen,freeandstableinternetisacommonunderstandingamongnationsthatexistinginternationallaw,normsandprinciplesforstatebehaviourontheinternationalstagealsoapplyincyberspace.Toprotectnationalinterests,mitigaterisks,andenhancethesecurityofInternetusers,thereisaneedforcontinuedcyberdiplomacybetweencountries.ThefocusoftheEUisthegovernanceandapplicationofinternationallawincyberspace,includingprotectingthefreeandopenInternet,reducingcybercrime,buildingcapacityinthirdworldcountries,en-hancinginternationalstability,andprotectingthedigitaleconomy.

Wehaveseenactivitybynon-stateactorswhoarereadyandwillingtomoveintofillavoidignoredbystates.Thesecurityand

2 Forexample,theFirstReportoftheInter-departmentalGrouponSecurityofIreland’sElectoralProcessandDisinformationidentifiestheprimarycyber-relatedriskstothesecurityoftheelectoralprocessasDestabilisationEvents,ManipulationoftheElectoralRegister,andDataExfiltration;Seemorehere:https://www.gov.ie/en/news/37e936-government-publishes-first-report-of-the-interdepartmental-group-on-/

3 Forexample,anyattackthataffectstheavailabilityofcashsuchasatBanks,PostOfficesorATMswillrestrictaccesstocashforsocietyanddependingonthedowntimecouldhaveseriouseffectsonthosedepen-dentonSocialProtectionPaymentsandtheeconomyingeneral.

resilienceofcyberspacecanonlybefullyachievedthroughcollaborationandcoop-erationwithvariousactors,includingnationstatesandtheprivatesector.

Data fraud and theft

Asmentionedabove,theinternetisanimportantenablinginfrastructureforeco-nomicgrowthandprosperity.Side-by-sidewithitsincreasingimportance,however,hasbeenagrowthinattemptedcyber-attacks,duetothehighvalueofpersonalandcor-poratedata.Althoughtherehavebeensig-nificantimprovementsinbuildingresiliencetoattacks,thiscontinuestobeagrowingchallengeforbusinessesandindividuals,andsocietyingeneral,includinginregardtotheprotectionofgovernmentdigitalassets.

Immediaterisksforbusinessesandindivid-ualsincludethelossortheftofpersonalorbusinessinformation,oreventhede-structionofpropertyorcriticalrecordslikemedicalrecords.Theimpersonationofindi-vidualsinordertomakefraudulenttrans-actionsisamajorissueinvolvingbillionsofeuroglobally.Significantdatabreacheshavebeenreportedoverthepastseveralyearsbyvariousmultinationalcompanies.

AnychallengetothequalityofIreland’sdataregulationenvironment,whichhasbeenacriticalfactorinthecontinuingex-pansionandgrowthofthedigitaleconomyinIreland,createsariskofbusinessdisrup-tionaswellasreputationaldamage.Irelandhasthepotentialtoleveragethesignificantexpertisethatexistsinourprivatesector,aswellasinformation-sharingandcooperationwithagenciesinothercountries,inordertotacklethisrisk.

Thepublicserviceisalsoamajorcollectorandprocessorofdata.Aspecificriskisthetargetingofpublicservicedatarepositories

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andthetheft,exfiltration,denialofaccessto,orcompromisingof,thatdata.Asuccessfulincidentwouldhavetheimmediateeffectofreducingconfidenceinpublicserviceadmin-istrationandtheuseoftechnologyforpublicservices.

TheGeneralDataProtectionRegulation(GDPR),whichcameintoforceinMay2018,isaregulationtostrengthenandunifydatapro-tectionwithintheEU.Itwillgivetherighttoapersonwhohassufferedmaterialornon-ma-terialdamagetoseekcompensationfromadatacontroller.Asignificantdatabreachcouldresultinsignifi-cantcompensationpaymentsbeingmade.

Thechallengesdiscussedabovearejustsomeofthemanyformsthatcybercrimemaytake.Thecyberdimensiontoconventionalcrimebringswithitsignificantdemandsintermsofthetoolsneededtogatherevidence,identifyperpetratorsandundertakepreventioninitia-tives.Attacksonthedatastoredoncomputersorthesystemsthemselvesisanotheraspectofcybercrimethatposesbothlawenforcementissuesandinsomecases,Statesecurityissues.Theinternationaldimensiontoinvestigatingcybercrimebringswithitmanychallengesintermsofinternationalcooperationandjuris-diction.Therearefurtherchallengesfacedbylawenforcementagenciesincludinglossofdata,encryption,virtualcurrencies,lossoflocation,theneedforexpeditedmeasures,managingonlineinvestigations,andmanagingpublic-privatecooperation,amongstmanymore.

6.2. Disruptive technology trends

Disruptivetechnologytrendsarecontinuouslybringingnewwaysofconductingbusiness,manufacturingproductsandmakingdeci-sionswhichcoulddisrupttraditionalmethodsandleadtosignificantjobshiftsandlosses

inaffectedsectorsandroles.Legislativeandregulatorychallengesmaycomewithadvancesindigitaltechnologies,aswellasthreatstocurrentformsofemployment.Thespeedofadoptionoftechnologicaladvancesisseeingtheemergenceofnewglobalbusinessmodels,products,markets,sectorsandactivities;aswellasdisruptingwaysofworkingandimpactingonskillsneeds.

A2018OECDstudy(NedelkoskaandQuintini)suggeststhat14percentofjobsinOECDmembercountrieshaveahighprobabilityofbeingautomated.Itshouldbenotedthatalternativemodelsandmeasure-menttoolshavebeenusedinotherstudiesinthisareawhichhavegeneratedsignifi-cantlyhigherestimatesofjoblossesarisingfromautomation.Inaddition,andasmen-tionedinSection4.2aboveindiscussingSkilledLabourShortages,whiletheimpactofautomationonjobsisexpectedtovarybetweencountriesandregions,theOECDhavefoundthatonaverageasmuchastwooutofeveryfivejobscouldbesignificantlyimpactedbyautomationoverthenexttwodecades4.Automationislikelytoreplacesomejobs,re-shapeothersbutalsocreatenewones.Therefore,inthecomingyearsitwillbecriticalthatworkerscanacquiretheskillsnecessarytotransitionsuccessfullyastechnologytransformstheworldofwork,includinginthecontextoftheFETSectorintermsofdevelopingintermediatelevelskills.

IntermsofregionalimpactsinIreland,theExpertGrouponFutureSkillsNeeds(EGFSN)publishedareport5inDecember2018,whichfoundthatDublinistheleast

4 JobCreationandLocalEconomicDevelopment2018,Pre-paringfortheFutureofWork,seelink:https://read.oecd-ilibrary.org/employment/job-creation-and-local-economic-develop-ment-2018_9789264305342-en

5 EGFSN(2018)‘DigitalTransformation:AssessingtheImpactofDigitalisationonIreland’sWorkforce’Availablehere:http://www.skillsireland.ie/Publications/2018/Digital-Transformation.pdf

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atriskfromautomation(2percentathighrisk,mainlyinRetailandHospitalitysectors),whiletheMidlandsregion(5percentathighriskand64percentatmediumrisk)andBorderregion(5percentathighriskand62percentatmediumrisk)aretheregions’mostatrisk.GiventhelikelyimpactofBrexitontheseregions,andwithunemploymentalreadyhigherthanaverageinthesetworegions,thisisparticularlychallenging,especiallyinlightofconcernsofruralandregionalimbalanceexpressedearlierintheReport(Section4.4).

Inaddition,aUCCstudy6identifiesthetownsinIrelandthataremostatriskfromjobau-tomation7.Thereportfindsthattheauto-mationriskfortownsismainlyexplainedbypopulationdifferences,educationlevels,agedemographics,theproportionofcreativeoccupationsinthetown,thetownsize,anddifferencesinthetypesofindustriesacrosstowns.TheresultssuggestthatthepatternofjobriskfromautomationacrossIrelanddemandspolicythatisnotone-size-fits-all,butratheralocalised,place-based,bottom-upapproachtopolicyintervention.Thereportfoundwidedifferencesbetweentheaveragenumbersofjobsathighriskofautomationacrosstowns,fromalowof26percenttoahighof58percent.Inaddition,theanalysisfoundthatmany‘athighrisk’townshave‘atlowrisk’nearbytownsandmany‘atlowrisk’townshave‘athighrisk’neighbours.Theanal-ysisalsofoundthattherearesomeconcentra-tionsof‘atlowerrisk’townsandseparately,concentrationsof‘athigherrisk’towns.Forexample,intheDublincityregion,Malahide,SkerriesandDonabateareallatlowerriskofautomation.TheReportpointedoutthattownsexposedtoagricultureandmanufactur-ingshouldbemainconcernsastheyarelikelytobethetownsmostdisruptedbyfutureau-tomation.Itnotesthatmakingskillsdevelop-

6 https://www.ucc.ie/en/media/projectsandcentres/srerc/SRERCWP2019-1_upload.pdf

7 Acrossthe200townswhichhaveapopulationof1,500ormoreusingdatafromthe2016census

mentandeducationmorefinanciallyacces-sibleandremotelypossiblewillhelptocurb‘braindrain’andunlocklocalcompetenciesinperipheraltowns.

Whilenosectorwillbeimmunetotheimpactofdisruptivetechnology,jobsandfunctionsthatrequiregreaterdegreesofcognition,subjectivethoughtandpersonalinteractionwillbesomewhatcushioned.Theacquisitionofnewskillsisvitaltokeeppacewithadvancesintechnology.Similarly,theavailabilityoftherightskillsisanim-portantenablerofenterpriseperformanceandgrowth.Jobsasweknowthemareundergoingasystemofchangewiththeskillsrequiredwithmanyjobschangingsignificantly.Numerousacademicstudiesandreportshaveidentifiedthatre-skilling/up-skillingoftheworkforceisarequirementofthefutureasjobsbecomeincreasing-lydigitalised.Thus,itisessentialthattheworkforceisequippedwiththerequisiteskillstofullyunlockthebenefitsofthedigi-taleconomy.

Inaddition,therearerisksassociatedwithdisruptivetechnologiesaroundfailingtocommunicatethevaluethattheycanpro-videingrowingtheeconomy,andfailingtocapitaliseoneconomicopportunities,andfailingtodeploytheminpublicsectorrapid-lytoprovideconcurrence(andensurevalueformoney)withtheprivatesector.Failingtoassessandmitigatetheadversesocietal,workplaceandsocialimpactofdisruptivetechnologiesonthelivesofourcitizens,associatedregulatorychallenges,andfailingtoadequatelyplanforemploymentshifts,arealsoriskstobeconsideredandtackledatanearlypoint.

Technologicaladvanceswillalsoleadtonewjobsbeingcreated,aswellaseconom-icbenefitsassociatedwithmoreefficientwaysofdoingbusiness.AccordingtoPwC

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analysis,smartautomationhasthepotentialtoadd$15trilliontoglobalGDPby2030.However,thereisariskthatthesenewjobswillbelessdependentonhumanlabour,orwillrequiresignificantre-skilling.Thescaleofthere-skillingproblemisbecomingapriorityfortheEuropeanCommission,asithasbeensuggestedthatinthenearfuture,90percentofexistingjobswillrequiresomedegreeofdigitalskills.Whilethispresentsbothoppor-tunitiesandthreatstheresearchgenerallyin-dicatesthat,acrossallcountries,workerswithalowerlevelofeducationareatthehighestriskofdisplacement.Asartificialintelligence(AI)continuestodevelopitcouldalsobethatinthefuturehigherskilledoccupationsmayfacehigherriskofautomationthanthecur-rentstateoftechnologyimplies.WhilethisisnotariskuniquetoIreland,itrequiresactionsacrossarangeofareasincludingasignificantincreaseinourdeliveryoflifelonglearningandskillsdevelopmentaswellastheneedforcontinuedinvestmentinthedigitaleconomyandR&D,andappropriatesocialsafetynetmeasures.

IrelandhasparticipatedinthecreationandagreementoftheEUCoordinatedPlanontheDevelopmentandUseofArtificialIntelli-gencewhichwaspublishedbytheEuropeanCommissioninDecember2018.ThePlansetsoutaframeworkofissues,togetherwithsuggestedinitiatives,whichneedtobedealtwithbyMemberStatesinordertoenabletheEUtocompetegloballyinthefieldofAI.ThePlanalsospeakstotheneedtoensurethatAIsolutionsareethicallysound,makingsurethattheyarefreefrombiasandunintendedcon-sequences.IrelandiscurrentlydevelopingaNationalArtificialIntelligenceStrategytoalignwithEU-relatedinitiatives.TheGovernmentalsoestablished,underProjectIreland2040,a€500millionchallenge-basedDisruptiveTechnologiesInnovationFund,reflectingtheimportanceofaction,andinvestmentinthisarea.

6.3. Anti-Microbial Resistance

Anti-microbialresistance(AMR)isanin-creasingconcernacrosstheglobe,withtheWorldHealthOrganisation(WHO)describ-ingitas“acrisisthatmustbemanagedwiththeutmosturgency”8.Antimicrobialshavebeenessentialfortheprovisionofmodernmedicalcaresincethe1940s,substantial-lyreducingmortalityandmorbidityfrominfectiousdiseasesandcomplications.Theseadvancesarenowbeingputatriskbyasignificantriseintheprevalenceofbacteriathatareresistanttooneormoreantimicrobials,withknock-onconsequencesforhumanhealthaswellastheeconomyintermsofmoreexpensivetreatmentcostsandlostproductivity.

TheWorldEconomicForum’sGlobalRisksReportfor20189includedareflectionontheevolutionofthisriskontheworldstage.ThisquotedresearchfromtheWorldBank,theUKGovernmentandtheWellcomeTrustestimatingAMRwouldexertadragonglobalGDPofbetween1.1percentand3.8percentbetweennowand2050,aswellascosting$100trillionandkilling10millionpeopleoverthatperiod.Thatreportalsonotedthatresistancetoeventhestrongestantibioticscontinuestospread,astheyareincreasinglyusedtocombatdiseasesresistanttoweakerantibiotics.Itnotesthatresearchconductedin2017demonstratedthatbacteriaresistanttocolistin,the“anti-bioticoflastresort”,hadspreadthroughouttheworldwithin18monthsoftheresis-tantstrainfirstemerging.Additionally,theOECDpredictthatresistancetosecondandthird-lineantibiotics,whicharealastlineofdefenceintreatinginfections,isexpectedtoincreaseby70percentacrossOECDcountriesby2030,overtheanti-microbial

8 WEFGlobalRisksReport2018http://reports.weforum.org/glob-al-risks-2018/anti-microbial-resistance/

9 https://www.weforum.org/reports/the-global-risks-report-2018

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resistancerateseenin200510.

Theextensiveuse,misuseandoveruseofantimicrobialsinhumanhealthhasincreasing-lyraisedlevelsofantimicrobialresistanceinawiderangeofpathogensinallcountriesandinpatientsofallagegroups.Intheanimalpop-ulation,therateofdevelopmentandspreadofantimicrobialresistancehasalsoincreased.Theincreasingglobaldemandforaffordablefood,andinparticularanimalprotein,hasledtointensificationincertainanimalsectors,whichcanresultinhigherpotentialrisksofdiseaseoutbreaks.Therefore,astrongrelianceonavailabilityofeffectiveantimicrobialstotreatdiseaseandprotectanimalwelfarehasoccurred.

Therearealsoincreasingconcernsabouttheroletheenvironmentmayplayinthespreadofclinicallyrelevantantimicrobialresistance.Environmentalregulatorsmonitorandcontrolsomeofthepossiblepathwaysresponsibleforthereleaseofantimicrobialsintotheenviron-ment,e.g.throughwatercontaminationandagriculturalrun-off.However,agreaterun-derstandingofmanyoftheissuesconcerningtheenvironmentalrolewillfurtherenhancethedeliveryofenvironmentalprotectionfromAMR.Theriseinantimicrobialresistanceisthusoneofthegreatestpotentialthreatstohumanhealthatglobal,Europeanandnationallevelswithseriousconsequencesforpublichealth,animalhealthandwelfare.Giventhatthenaturalresponsesofmicrobestotheuseofantimicrobialsisresistance,theythereforeneedtobeusedasprudentlyaspossibletoretaintheirefficacy.

6.4. Major Pandemics

Everyfewyearsanewpathogenemerges.Thevastmajorityarevectorborneand,asaresult,

10 OECDStemmingtheTideReport,October2018.https://read.oecd-ilibrary.org/social-issues-migration-health/stemming-the-superbug-tide_9789264307599-en#page18

arenotasignificantriskinIreland.

Pandemicinfluenzawasdeterminedasthereasonableworst-casescenariointheIrishcontext.Theinfluenzavirusmutatescontinuouslyandtherehavebeen12pandemicinfluenzassince1895,themostrecentofwhichwasin2009.Historicalevidenceshowsthatsuchpandemicshavethepotentialtocausedeathandillnessonasignificantscaleandtodisruptnormalsocialandeconomicactivity.Advanceplan-ningandpreparednessarecriticaltohelpmitigatetheimpactofapandemic.Whenthenextpandemicoccurs,itwillrequireawhole-of-governmentresponsetoensurethatthreattopublichealthanddisruptionofservicesandsocietyareminimised.

TheInternationalHealthRegulations(IHR)(2005),togetherwithDecisionno.1086/2013/EU,providesthelegalframe-workforthetimelyandeffectiveman-agementofabroadrangeofseriousandpotentiallyinternationalpublichealthrisksandevents.Throughthese,Irelandisrep-resentedontheEUHealthSecurityCom-mittee,andtheDepartmentofHealthandtheHealthServiceExecutivemaintainclosecontactwiththeEuropeanCentreforDis-easePreventionandControlandtheWorldHealthOrganisation.Theseclosecontactsareusedtomonitor,predictandmitigatethespreadandimpactofpandemicinfluen-za,andotherinfectiousdiseases.

6.5. Nuclear contamination

Contaminationasaresultoffalloutfromanuclearaccidentisariskthathastobeacknowledged,despitethelowprobabilityassociatedwiththisforIreland.Obviousriskstopublichealthandwell-beingarise,aswellasthepotentialfornegativeeco-nomicimpact.Thisissignificant,inpartic-

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ularinrespectofthepotentialreputationalrisktotheagriculturalsector.ThereisariskofconsumerresistancetoevenminisculelevelsofradioactivityinthefoodchainandIreland’scompetitorsportrayingIreland’sfoodproductsasunsafe,werecontaminationtooccur.

ApaperpublishedbytheEconomicandSocialResearchInstitute(ESRI)examinedthepoten-tialcosttotheIrisheconomyundermultiplescenariosinvolvingvaryinglevelsofcontam-ination11.Whilestressingtheverylowriskofanuclearaccidentandwithoutmeasuringthelikelihoodofanyparticularscenario,thestudyassessedpotentialcoststoIrelandinfourhypotheticalscenarios:costsrangedfrom€4.1billioninascenariowithnocontamina-tionwherelossesarereputational,throughto€115billion,wherehighlevelsofradioactivecontaminationwouldnecessitateaprolongedperiodoffoodcontrolsandagricultureprotec-tiveactions.Thepaperalsoestimatesthatin-directlossesintheIrisheconomywouldrangefrom€287millioninascenariowherelossesarereputational,to€44billioninascenariowithhighlevelsofcontamination.

TheintersectionsofthisriskwithFoodSafetyarehighlightedintheESRIpaperwhereitisstatedthatmeatanddairyproduceaccountfor57percentofthelostvalue,wherelossesarepurelyreputational.Inthemostextremescenariodealingwithhighlevelsofcontamina-tion,thetotalvalueoflossofexportmarketsissome€84bn,withmeat,dairyandseafoodproduceaccountingforover€50bn.

Inviewofthepotentiallycatastrophichuman-itarianconsequencesofanucleardetonation,itwillcontinuetobeimportanttocontinueinternationalengagementrelatingtonuclearsafety,aswellasonnucleardisarmamentandnon-proliferation.

11 ESRIDisastercostassessment:Acasestudyofthepotentialeco-nomicimpactofanuclearaccidentaffectingIreland:https://www.esri.ie/events/disaster-cost-assessment-a-case-study-of-the-potential-econom-ic-impact-of-a-nuclear-accident-affecting-ireland

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Annex 1. Government Task Force on Emergency Planning – National Risk Assessment for Ireland 2017

ThisNationalRiskAssessmentcomplementsthedetailedriskassessmentworkcarriedoutbytheGovernmentTaskForceonEmergencyPlanning,chairedbytheMinisterwithre-sponsibilityforDefence,whichisconductedinthecontextoftheStrategicEmergencyManagementNationalStructuresandFrame-workapprovedbyGovernmentin2017andIreland’sreportingcommitmentsundertheEUCivilProtectionMechanism(UCPM).ThroughtheOfficeofEmergencyPlanning,undertheDepartmentofDefence,athreeyearNationalRiskAssessmentprocessandmethodologyisapplied,whichfocusesonrisksrelatingtopotentialcivilemergenciesatnationallevel.

TheWhitePaperonDefence(2015)setsouttheGovernment’scommitmenttomain-tainandfurtherdeveloparobuststrategicemergencymanagementframework,andtheGovernmentTaskForce(GTF)onEmergencyPlanningconductsacyclicalprocessofhazardanalysisandriskassessmentasanessentialstepintheprocessofidentifyingthechalleng-esthatmayhavetobeaddressedbysociety,particularlyinthecontextofemergencyman-agement.

TheGTFriskassessmentprocesswasfirstcar-riedoutin2012andledtothepublicationofthefirstNationalRiskAssessmentforIreland2012,whichwasacceptedbytheEuropeanCommissionasmeetingtherequirementsoftheUnionCivilProtectionMechanism(UCPM).Followingareviewin2016bytheOfficeofEmergencyPlanningandDublinCityUniversityBusinessSchool,theGTFincorpo-ratedanumberofmethodologicalchangestothisprocess,whichweredesignedtoreflectcurrentriskmanagementstandardsandinter-nationalgoodpractice.

ThisledtotheproductionofafurtherNationalRiskAssessmentforIreland2017,whichconsideredspecificrisksrelatingtopotentialcivilemergenciesatnationallevelandwasadoptedbytheGTFinMarch2017andwassubsequentlynotedbyGovern-ment,submittedtotheEUCommissionandpublishedatwww.emergencyplanning.ie.

TheNationalRiskAssessmentforIreland2017hasspecificallyidentifiedtwentykeynationalrisksthatwillbeusedtoguidefuturemitigation,planningandpreparationactivitiesatnationalandregionallevelandwillhelpinformfutureassessmentsofriskmanagementcapabilities.Floodingremainsoneofthehighestlikelihood/impactrisksonthisNationalRiskMatrix2017,withInfectiousDisease,FoodContamination,NuclearIncidents(abroad),DisruptiontoEnergySuppliesandNetworkandinforma-tionSecurity/CyberIncidentshighlightedashavingpotentiallythehighestimpactonIreland.

InlinewithgoodpracticeandtheUCPMrequirements,whicharecurrentlyunderreview,theaimistorepeatthisprocessatthreeyearlyintervalssoastocapturenewandemergingthreatsandchangingtrends.TherevisedUCPMandthesubsequentGuidelinesbeingdevelopedwillrequirePar-ticipatingStatestoreportontheirNationalRiskAssessmentsandRiskManagementCapabilityAssessmentsagainbytheendof2020.

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Annex 2. Ireland’s Changing Demographics and related risks

Introduction

Ashasbeenthoroughlydocumented1,Ireland’sdemographicstructurecontinuestochange.Asmodernmedicinecontinuestoadvance,lifeexpectancyrisesandhencemortalityratesfall.Thedecreaseinmortalityratesleadstoincreasednumbersofolderpeoplecontinuingtolivelongerandhealthierlives.

Themostrecent2016Censusshowsthatthenumberofpeopleaged65andoverhasseenthelargestincreaseofanyagecohortsincethelastcensusin2011,increasingby19.1%,or102,174people2.TherehasbeenasteadyincreaseinthenumberofolderpeoplelivinginIrelandsincethe1980s,whichdemonstratesaconstantriseintheolderagecohort,shiftingIreland’spopulationstructureupwards.

TofeedintothedevelopmentoftheNationalPlanningFramework3,theESRIformulat-edpopulationprojections,whichindicatethatIreland’spopulationwillgrowbyjustunder900,000people.ThiswillbringthepopulationofIrelandtoc.5.7millionpeopleby20404,whichisbroadlyinlinewiththeCSO’spopulationprojectionsto20465.

Inthecontextofprojectingpopulationgrowth,migrationratesaregenerallyfactoredin.InIreland,however,migrationrateshavehistoricallyvariedsignificantlyovertimereflectingthesmall,opennatureoftheeconomyandhistoricpatterns.Thiscanmakeforecastingactualpopulationgrowthdifficult.TheESRIusedamid-rangescenariotoinputintotheNation-alPlanningFramework,whichisbasedonsustainedin-migrationandeconomicgrowthto2040.

Thesechangesinourdemographicstructureareextremelysignificantintermsoftheirim-plicationsfortheStateandforIrishsociety,astheyraisechallengesacrossarangeofareas.Challengesincluderelatedpressuresonexpenditureonpensionsandhealthcare,aswellasimplicationsfortheeducationsystem,andappropriatehousingsupply,amongothers.ByfirstlysettingouttheprojecteddemographicchangesforIreland,inthecontextofsimilarEUandinternationaltrends,secondlyoutliningthemostsignificantimpactsfortheeconomyandsociety,andlastlydiscussingtheinterlinkageswithmanyoftheotherRisksidentifiedinthisyear’sNationalRiskAssessment,thisworkwillattempttohighlighthowpertinent,timelyandsignificanttherisksandimplicationsofourageingsocietytrulyare.

1 SeereferencestoIGEES,TheDepartmentofFinance,TheParliamentaryBudgetOfficeandtheESRIthroughout,amongstothers.

2 CSOPressStatement:Profile3–AnAgeProfileofIreland.Availablehere:www.cso.ie/en/csolatestnews/presspages/2017/census2016pro-file3-anageprofileofireland/

3 publishedaspartofProjectIreland2040inFebruary2018

4 ESRI:ProspectsforIrishRegionsandCounties(January2018).Availablehere:https://www.esri.ie/publications/prospects-for-irish-re-

gions-and-counties-scenarios-and-implications 5 CSOPopulationandLabourForceProjections2016-2046.Availablehere:https://www.cso.ie/en/statistics/population/populationandlabourfor-

ceprojections2016-2046/

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Part 1: Changing Population Structure in Ireland

Asmentionedabove,weareseeingasteadyriseinIreland’solderagecohort.Inaddition,asthenumberofpeoplegrowingolderincreases,thenumberofyoungerpeopleisnotgrowingataratefastenoughtoreplacethoseleavingtheworkforce.TheAgeDependencyRatio(ADR)hasgrowninIreland,ameasurewhichtheCSOcalculateasthesumofyounger(0-14years)andolder(+65years)peopleasapercentageoftheworkingagepopulation(15-64).Between2011and2016,thispercentagegrewby3.4percen6t andisforecasttocontinuetogrowinthefuture.

Tolookspecificallyatthedependenceoftheolderagecohortontheworkingagepopula-tion,theold-agedependencyratio(OADR)isthemostusefulmetric.Currently,accordingtothe2016Census,thepopulationintheolderbracket(65+),is0.6millionpeople,whiletheworkingagecohortcurrentlystandsat3millionpeople.ThisindicatestheOADRisapproximately20percentatpresent.Inotherwords,thereare5peopleworkingforevery1retiree.Inthecontextofanincreasingnumberofolderpeople,andadecliningnumberofyoungerpeopletoreplacetheworkingpopulation,theOADRisforecasttoincreasesignificantly.TheDepartmentofFinancestatethatthisfigureistogrowto45.7percent7 bymid-century(usingEurostatprojections),andtheParliamentaryBudgetOffice(PBO)estimatethefiguretobe44percent8in20519.Theseforecastsindicatethattheratioofworkingagepopulationtotheolderpopulationissettodeclinefrom5:1to2:1inthenext30years.Table1illustratesthepopulationofIreland20yearsprevioustothemostrecentcensus,andtheprojectionfor20yearslater.Asisclear,Ireland’spopulationissettogetincreasinglyolder,whichwillsteadilyincreasetheOADR.

International Comparison

ThedemographicchallengescurrentlyfacingIrelandarenotunique.Whencomparedinternationally,wecanseethesametrendsinothercountries,insomecasestoanevenmoreextremedegree.IntheEuropeanCommission’s2018AgeingReport,theOADRiscalculatedfrom2016to2070forallEUcountries.Table2setsouttheprojectionsfor2016,2050and2070.WhilewecanseethatIreland’sOADRisprojectedtobeoneofthelowestintheEU27in2050,andthelowestin2070,thegraphillustratestheextentofthechangebetween2016(21%)and2050(46%)withIreland’sOADRmorethandoublinginthatperiod.

WorkbytheDepartmentofFinancealsocomparestheEUaveragewithJapanandtheUSwiththeOADRintheUSexpectedtoreach43.1percentby2070,whileJapanisexpectedtoreach69.6percentbythesameyear10.Japan’spopulation,inparticular,isageingatanalarmingrate,asdeathsnowoutnumberbirthsbyanaverageof1,000perday,indicatinga

6CSOPressStatement:Profile3–AnAgeProfileofIreland.Availablehere:www.cso.ie/en/csolatestnews/presspages/2017/census2016pro-file3-anageprofileofireland/

7 DepartmentofFinance:PopulationAgeingandthePublicFinances(August2018).Availablehere:https://www.gov.ie/en/publica-tion/2e8463-population-ageing-and-the-public-finances/

8 ParliamentaryBudgetOffice:DemographicsandVotedExpenditure(2019).Availablehere:https://www.oireachtas.ie/en/search/?q=demo-graphics+and+voted+expenditure

9 Resultscandifferduetoassumptionsusedwhenprojectingpopulationgrowth,particularlyaroundmigrationandfertilityrates.Initspopulationprojections,theCSOprovidethreedifferentmigrationratescenariosandtwodifferentfertilityratescenarioswhenprojectingpopulation,whichmeanspopulationcanbeprojectedinamultitudeoffashions.

10 DepartmentofFinance:PopulationAgeingandthePublicFinances(August2018).Availablehere:https://www.gov.ie/en/publica-tion/2e8463-population-ageing-and-the-public-finances/

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0%

10%

20%

30%

40%

50%

60%

70%

EU27 Belgium Denmark Germany Ireland Spain France Italy Netherlands Poland Portugal

Table 2 - OADR EU Projections

2016 2050 2070

Table 1: Population Pyramids for Ireland

Table 2 - OADR EU Projections

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declineinthepopulationbyabout842,000by202011.

InthecontextofOECDdata,weseethesametrends,withtheOECDexpectingIreland’sOADRtomorethandoubleby207512.WhiletheOECDratiosreportedarenotdirectlycom-parabletootherfiguresoutlinedhere(astheOECDcalculatestheOADRusingaworkingagepopulationof20-64asopposedto15-64),itisclearthatthetrendisthesameinternationallywithallindicatorspointingtoanOADRthatissettoincreasesignificantlyinthefuture.

Part 2: Impact of our Changing Demographic Structure

AsIreland’sdemographicstructureshiftstowardsanageingpopulation,itwillhavewide-rangingimpactsontheeconomyandsociety.Certainsectorswillseethemostimpactfromthesedemographicchanges,andareoutlinedinthissection.Thesesectorshavebeenrecognisedbyresearchinstitutesandpolicymakersasacuteareasofrisk,withpolicyre-sponsesalreadybeingimplementedtotacklemanyoftheseissues.

- State and Public Pension pressuresOneofthesectorsthatwillbemostaffectedbyanageingpopulationisthepensionssector.Asincreasingnumbersofpeopleretire,andaresettolivelonger,thisincreasesthedemandforboththeStateandPublicServicePension,asgreaternumbersofpeoplewillwithdrawpensionsoveralongerperiodoftime.Withdecreasingnumbersofpeoplewithinthework-ingagepopulationtoreplacetheseretiredworkers,thiswillfurtherincreasepressureonthepensionssystemasthetaxbasenarrows.

AnactuarialreviewoftheSocialInsuranceFund2015,carriedoutbyKPMGfortheDepart-mentofEmploymentAffairsandSocialProtectionin2017,forecastsandidentifiesthescaleofthesepressures.Thepensionsupportratio,whichKPMGdefineastheratioofworkerstoindividualsovertheageof66(similartotheOADR),isprojectedtodeclinefrom4.9workersforeverypersonover66currently,to2.9workersby2035,and2.0workersby2055.

ThisprojectioniseasedslightlybytheincreaseintheStatePensionAge(SPA),settoincreaseto67and68in2021and2028,respectively.TheincreaseintheSPAwillincreasethepen-sionsupportratioin2035from2.9workersto3.4workers,andfrom2.0workerto2.3work-ersin2055.ItisalsoanticipatedthenumberofpersonsofSPAandolderwillalmostdoublefrom586,000in2015to1,136,000in204513.

WhiletheincreaseintheSPAalleviatessomeofthepressuresonthepensionssystem,itisworthnotingthattheeffectiveretirementage,thatistheagepeopleactuallyretireat,isusuallylower.Thiseffectiveretirementagedrivestherequirementsforbenefitsandfunding,whichislikelytohappenatanearlierstagethantheSPA.

TheGovernment’sRoadMapforPensionsReform2018-2023,however,publishedinFeb-ruary2018,representsamajorreformoffutureState,privateandpublicservicepensionprovisioninIreland.UndertheRoadMap,aTotalContributionsApproach(TCA)fortheStatePension(Contributory)isduetobeintroducedfrom2020,andanew‘AutomaticEnrolment’

11 FinancialTimes:Japan’sageingpopulationmilestoneintensifiesinvestorfocus(19April2017).Availablehere:https://www.ft.com/content/be6bf7ac-43bd-11e8-803a-295c97e6fd0b

12 OECD:PensionsataGlance2017.Availablehere:https://www.oecd-ilibrary.org/social-issues-migration-health/pensions-at-a-glance-2017/old-age-dependency-ratio_pension_glance-2017-22-en

13 KPMG,ActuarialReviewoftheSocialInsuranceFund(2017).Availablehere:http://www.welfare.ie/en/downloads/actrev311215.pdf

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retirementsavingssystemisduetobeintroducedfrom2022tosupportandencouragepersonalsavingsprovision.Throughtheseandadditionalmeasures,theRoadMapaimstoaddresschallengesfacingpensionprovisioninthecomingyearsinIreland,whichincludeimplicationsarisingfromanageingpopulation,withanexpectedcostof€400billiontotheSocialInsuranceFundoverthenext50years14.

- Healthcare pressuresTheimplicationsofanageingpopulationonthehealthcaresystemaresignificant,intermsofincreaseddemandandrelatedcapacityissues.Althoughtherehavebeenimprovementsinthegeneralhealthofwesternpopulationsasmodernmedicinecontinuestoadvance,chal-lengessurroundingaccesstocare,supportfortheelderly(includingnursinghomes,commu-nitycareetc.)andthegreaterdemandforhealthcareservicesamongtheolderagecohortsareincreasing.

Asthedependencyratiocontinuestoincrease,i.e.theratioofpersonsunder15yearsandover65yearstopersonsofworkingage(15-64),itposestworelatedrisksinthecontextofhealthcare;theriskofadepletedtaxbaseduetoalowervolumeofthepopulationcontrib-utingincometax,andthegreaterneedforservicestocarefortheelderlyincludingincreasecomplexityandtheneedfornewpackagesofservicestomeetthatcomplexity.Whilemuchresearchhasbeencarriedoutontheseissues15andrelevantpolicyhasbeendevelopedwithinthiscontext(e.g.includingtheSláintecareImplementationStrategy,andthe“FairDeal”StatutoryNursingHomeSupportScheme),theimplicationsofanageingpopulationwillcon-tinuetoposesignificantrisksandchallengestothefutureofhealthservicesprovisionbothhereinIrelandandelsewhere.

AsdiscussedinSection4.2ofthemainReport,futurehealthcaredemandandthecostofhealthcareprovisionwillbeimpactedbyavarietyoffactorsinadditiontodemographics,includingincreasingincidenceofnon-communicablediseases(i.e.heartdisease,stroke,dia-betes,cancerandchroniclungdisease),andlifestyleriskfactors.Olderagecohortstendtobethehighestusersofmosthealthandsocialservicesandhavemorecomplexcareneeds.Itisestimatedthatwithinthenextdecade,thenumberofadultswithchronicdiseaseswillincreasebyaround40percent,withrelativelymoreoftheconditionsaffectingthoseintheolderagegroups.TheESRIestimatethatintheyearsto2030demandforpublichospitalserviceswillincreasebyupto37percentforinpatientbeddaysandupto30percentforin-patientcases,andthatdemandforGPvisitswillincreasebyupto27percent16.Thesefiguresdemonstrateclearlytheincreasedpressureshealthserviceswillfacewithinthenextdecadefromanageingpopulation.

TheESRIpredictthatthisprojectedadditionaldemandwillgiverisetodemandforadditionalexpenditure,capitalinvestmentandadditionalstaffingandwillhavemajorimplicationsforcapacityplanning,workforceplanningandtraininginthehealthsector.TheESRIaddthatadditionalinvestmentwillberequiredformostformsofcaretomeettheneedsofarapidlygrowingandageingpopulationinIreland.

- EducationComparedtothesectorsabove,wheredemandpressurescontinuetoriseinthelonger-term,educationdemandandcostpressuresaremoreacuteinthenearer-term,andthenbeginto

14 ARoadmapforPensionsReform2018-2023.Availablehere:https://www.gov.ie/en/publication/abdb6f-a-roadmap-for-pensions-re-form-2018-2023/

15 ESRIandIGEEStonametwo,andreferencedthroughoutthissection

16 ESRI,2017.Availablehere:https://www.esri.ie/system/files?file=media/file-uploads/2018-02/RS67.pdf

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moderate,especiallyinthecasesofprimaryandsecondaryeducation.Inapaperestimat-ingthebudgetaryimpactofchangingdemographicsintheyears2017-2027,IGEESnotethatprimarypupilenrolmentissettopeakin

2018andsecondlevelenrolmentin202517.Thiscreatesaneedforadditionalteachersintheshort-term,withassociatedimplications,particularlyintermsofretirement,redeploy-mentandrecruitment.

Thirdlevelcostpressuresarealsoexpectedtorisegiventhestrongdemographicgrowthintheschoolsystem.IGEESestimateincreasingnumbersofpupilsattendingthirdlevelupto2027(thecutoffyearfortheirresearch),withtheExpertGrouponFutureFundingforHigherEducationreportingthatthisnumberissettopeakin202918.Demandforasso-ciatedthirdlevelexchequerfunding(grantstoHigherEducationInstitutionsandStudentSupportpayments)willcontinuetoincreaseasaresultofthistrend,placingfurtherdemo-graphicbudgetarypressuresonStatespending.

TheReportoftheExpertGrouponFutureFundingforHigherEducation,publishedin2016,foundthatadditionalfundingof€600millionwillbeneededtofundhighereduca-tionby2021,increasingto€1billionby2030.Inadditiontothis,theExpertGroupesti-matesthat€5.5billionwillalsobeneededincapitalinvestmentoverthenext15years.Lastly,theExpertGrouprecommendsthatanadditional€100millionisneededtoadeliv-eryamoreeffectivesystemofstudentfinancialaid.

- Housing Whendiscussingchangingdemographicstructures,itisalsoimportanttobecognisantoftheeffectonhousingcapacityandneeds.Wehaveseenabovethatthepopulationintheagecohortof65+willincreasedramatically,withtheESRIprojectingthatthenumberofpeopleaged80+willincreasebybetween89percent(128,000people)and94percent(135,000people)from2015to203019.Housingprovisionwillneedtoadjustinordertosupportthisincreaseinolderpersons.

Unlikethebudgetarypressuresdiscussedforthethreesectorsabovewhichwillrequirelargeincreasesincurrentexpendituretomeetfuturedemandsinpensions,healthcareandeducation,capitalexpenditure(Exchequerand/orprivate)willberequiredtotransformthehousingsectortomeettherequirementsofanageingpopulationi.e.once-offspendingtotransform/buildnewhomeswhicharefitforpurpose.Intermsofpolicyinitiativesbeingdevelopedtotackletheseissues,theDepartmentofHousing,PlanningandLocalGovernment,alongwiththeDepartmentofHealth,havedevelopedapolicystatement20whichaimsto“encourageandfacilitatetimelyplanningbyolderpeople,andtorebalancethecaremodelawayfrominappropriateresidentialand/oracutecare,tosupportingolderpeopletoremainlivingindependentlyintheirownhomesandcommunitiesforlonger,asopposedtofasttrackingintolongtermstayoracuteset-tings”.

17 IGEES,BudgetaryImpactofChangingDemographics2017–2027(September,2016).Availablehere:https://igees.gov.ie/budgetary-im-pact-of-changing-demographics-2017-to-2027/

18 InvestinginNationalAmbition:AStrategyforFundingHigherEducation(March,2016).Availablehere:http://www.education.ie/en/Publi-cations/Policy-Reports/Investing-in-National-Ambition-A-Strategy-for-Funding-Higher-Education.pdf

19 ESRI,2017.Availablehere:https://www.esri.ie/system/files?file=media/file-uploads/2018-02/RS67.pdf

20 HousingOptionsforourAgeingPopulation(2019).Availablehere:https://health.gov.ie/blog/publications/housing-options-for-our-age-ing-population-policy-statement/

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- Budgetary Pressures and Capital Expenditure

IGEESidentifiesthreekeydriversofpublicexpenditureintheSpendingReviewPaper2018,Trends in Public Expenditure;demographics,publicservicepayandpensions,andthelabourmarket21.Overthenext10years,additionalcostsofover€400millionayearareexpectedfrom2023to2027acrossthehealth,educationandsocialprotectionareasduetodemographicpressures22.

TheDepartmentofFinancehavealsoinvestigatedtheeffectsofchangingdemographicsonpublicfinancesandnotethatthecurrentdebt-to-GNI*ratio,whichcurrentlystandsat104percent23,willcausefurtherdifficultiesintermsoftheabilityofthepublicfinancestoabsorbage-relatedspending.ResearchconductedbytheDepartmentin2018findsthat,inascenariowherenofurtherpolicyresponsesareimplemented,theimpactofpopulationageingwouldcauseasignificantincreaseinthedebt-to-GNI*ratioby2070(circa50percentagepoints)24.TheDepartmentofFinancefindthatarangeofpolicyresponses,suchasanincreaseinboththeemploymentrateofolderworkersandofthoseofworkingagecouldhelptomitigatetheimpactofpopulationageingonthepublicfinances.TheDepartment,however,warnthatadditionalmeasureswillberequiredtoensuresustainabilityofpublicfinances.TheincreaseddemandonExchequerfundingwillcreateassociatedopportunitycosts.AlthoughcapitalexpenditureisalreadysetoutintheNationalDevelopmentPlanto2027,underProjectIreland2040,thereisariskthatadditionalpressuresonthepublicfinancescouldthreatenthedeliveryoftheplannedprojectsandprogrammesunderthePlan.

Conclusion

MentionedaboveareonlysomeoftherisksIrelandfacesasourpopulationtransforms.Evidenceandresearchcanillustratethetangibleriskstotheeconomyandrelatedsectors,howeveritisdifficulttofullyforecasttheriskssocietyfacesasaresultofthesedemo-graphicchanges.Itisimportanttoremaincognisantofthepotentialemotional,mentalandsocietalimpacts,aswellasthefinancialpressuresthattheeconomywillface,asoursocietyages.

Part 3: Ireland’s Changing Demographics and the 2019 Risks

Thisthematicpiecegrewoutofadeeperanalysisofoneoftherisksdiscussedinthere-port,‘AnAgeingPopulationincludingpensionsandhealthsystemchallenges’,anditsinter-linkageswiththeotherrisksidentifiedinthisyear’sreport.Whilechangingdemographicsarenotnecessarilyrelevanttoalloftherisks,asforexamplewithnuclearcontamination,andterroristincidentsandarmedconflicts,whatisstrikingistheimpactchangingdemo-graphicswillhaveonthevastmajorityoftherisksdiscussed,underliningboththesignifi-canceandtheurgencyofplanningnowforthesechanges.

21 IGEES,SpendingReviewPaper:TrendsinPublicExpenditure(2018).Availablehere:https://www.gov.ie/en/collection/6551ae-spend-ing-review-2018/#public-sector-staffing-pay-and-pensions

22 IGEES,BudgetaryImpactofChangingDemographics2017–2027(September,2016).Availablehere:https://igees.gov.ie/budgetary-im-pact-of-changing-demographics-2017-to-2027/

23 CSO:QuarterlyNationalAccountsandInternationalAccountsresultsforQuarter12019.Availablehere:https://cso.ie/en/csolatestnews/pressreleases/2019pressreleases/prnaq119/

24 DepartmentofFinance:PopulationAgeingandthePublicFinances(August2018).Availablehere:https://www.gov.ie/en/publica-tion/2e8463-population-ageing-and-the-public-finances/

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Economic & Environmental Risks: Public Expenditure Pressures; Delivery of Public Infrastructure; Risk of Overheating; Supply & Affordability of Housing

Givencurrentbudgetarypressures,asoutlinedinSection3.3above,‘PublicExpenditurePressures’,itisimportanttorecognisetherisksthatdemographicchangeswillposefortheExchequer.Asoutlinedabove,anageingpopulationissettoincreasethenumberofExchequer-fundedpensionpayments,andtheirspanoveralongerperiodoftime,andtocreateadditionalpressuresontheprovisionofhealthcareservices,tonamebuttwosectors.AsdiscussedinPart2above,arangeofothersectors,includingtransport,housingandeducation,willneedtoadjusttochangingdemographicsrequiringthepublicfinancestoabsorbtherelateddemandsforadditionalcurrentandcapitalexpenditure.

AsmentionedinSection5.3above,‘DeliveryofPublicInfrastructure’,increasesinpop-ulationcoupledwithanunder-supplyofhousingandassociatedaffordabilityissues,atighteninglabourmarketandthecontinuedstrengthofeconomicgrowth,couldgiverisetooverheatingintheeconomy.ThisisalsolinkedwithSection3.2,‘RiskofOverheating’,whichalsodiscussestheneedtomaintainIreland’scompetitivenessinordertoensurestrongeconomicgrowth.Discussedinthemainreport,issuesaroundthesupplyofhous-ingremainoneofthemostcriticalchallengescurrentlyfacingtheState.Thishasledtochallengesaroundaffordabilityaspricesandrentsincrease.Asmentionedabove,asthepopulationincreasesandgetsolderthesupplyofadditionalandadequatehousingmaybecomeamoresignificantchallengeoverthelong-term.

Itisclearthatforwardplanningisvitaltoensureinfrastructureneedsaremet,toensuresufficientcapacityisdevelopedinlinewithboththeincreaseinpopulationanditschang-ingstructure,andalsotoensurethatpublicfinancesremainstableinordertobeabletorespondtocurrentandfuturespendinglevelslinkedwithachangingdemography.

Economic, Social & Technological Risks: RelianceonMNCs&sectoralconcentration;InternationalTaxchanges;CapacityofHigher&FurtherEducationSystem;SkilledLabourShortages;ImpactofDisruptiveTechnologytrendsonjobs&theeconomy

Inoutliningtherisksaroundrelianceonmultinationalcorporations’andsectoralconcen-tration,themainReportdiscusseshowIreland’seconomyisheavilyinfluencedbymultina-tionalcorporations(MNCs),concentratedinafewenterprisesectors.Ireland’sattractive-nessforFDIiscomprisedofamultitudeoffactors,includingafavourablylowcorporationtaxrate.Theavailabilityofayoung,skilledandeducatedworkforce,however,isalsoapull-factorforMNCstoconductbusinessinIreland.

Asthesizeofourworkforcenarrows,coupledwithquestionsaroundthesustainabilityofthefundingmodelfortheHigherEducationsector,thisrisksareductioninIreland’sat-tractivenessasacountrytoinvestin.GivenIreland’srelianceoncorporationtaxreceiptstodate,thiscouldhaveknockoneffectstothepublicexpenditurepressures,mentionedabove.AsdiscussedaboveinPart2ofthisthematicpiece,demographicmovementswillplaceincreasingpressuresonthehighereducationsystemovertheshort-to-mediumterm.Thiscontinuedgrowthofenrolmentsissettopeakin2029.Inordertomaintainthesamelevelofqualityeducation,theremaybecallsforpublicfundingtorisetomeetthisde-mand.

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Followingonfrom2029,asthenumberofstudentspredictedtoenrolbeginstodecline,andwhilerelatedpublicexpenditurepressuresmayease,areductioninthenumberofstudentswiththirdleveleducationmayreduceIreland’sattractivenesstoMNCs,asabove,andmayresultinareductionintheeconomicbenefitsassociatedwithbothourhighlevelofFDI,andouruniversitysector.AsmentionedinSection4.1above,theIrishUniversitiesAssociationestimatethattheIrisheconomybenefittedby€8.9billionin2018fromIre-land’ssevenuniversities.

Anageingpopulationmayalsohaveimplicationsforproductivity.Researchhasbeeninconclusiveabouttheeffectsanageingpopulationhasonproductivity25,howeverrecentworkbytheIMFfoundthatanageingworkforcereducesgrowthinlabourproductivity,duetothenegativeeffectontotalfactorproductivitygrowth26.TheIMFalsostatethatthelargestnegativeimpactwilloccurincountrieswhererapidworkforceageingisanticipatedinconjunctionwithhighdebtburdens,andtheysiteIrelandasanexampleinthiscontext.

Section4.2discussestherisksaroundskillsshortagesinthelabourmarket,andinpartic-ularthelowparticipationratesintheeconomy.Asthelabourforcedeclinesinthefutureduetoanageingpopulation,thisriskmaybeexacerbated,particularlypost2029asthenumberofhigher-levelgraduatesbeginstodecline.

Asdiscussedintherisksarounddisruptivetechnologytrends,thelikelihoodofautomationreplacingjobsandimpactingothersisincreasing,with2outofevery5jobsathighriskofautomation.Ifautomationresultsinanincreaseinunemployment,thisdisplacementofjobscouldhaveanegativeknockoneffecttothecollectionofincometaxes,oneoftheleastvolatiletaxrevenuestreams(inadditiontothewidersocietaleffectsthatwouldarise).Asdiscussed,anarrowingtaxbasewouldpresentchallengesinfutureyearsinordertomeetfuturedemandscausedbychangingdemographics.TheimpactofthesedisruptivetechnologytrendswillneedtobemonitoredandoptimisedforIrelandtounlocksomeoftheopportunitiestheymaybring.Inparticular,itwillbeimportanttoensureweplanforthesetrendsthroughincreasinglife-longlearningandupskillingopportunitiesforthoseatriskofdisplacement.

Social Risks: Social Cohesion including Perceptions of Rural and Regional Imbalances; Migration & Integration

Growinglevelsofinequalityhavebeenacauseforconcernbothnationallyandinternation-ally.Section4.5,‘SocialCohesionincludingPerceptionsofRuralandRegionalImbalances’,notesthattaxationandsocialpolicytransfershavebeeneffectiveinoffsettingmarketincomeinequality.Aswehaveseenalready,increasesintheOADRarelikelytocreatepressuresontheprovisionofsocialservicesandpayments.Itisimportanttoconsidertheeffectsofchangingdemographicsonincomeinequalityandensuringthatlevelsofpovertydonotincreaseasaresultofapossibledeclineintaxrevenuestreamstoredistribute.

Althoughdemographicchangescanleadtonegativeconsequencesinthecaseoftherisksmentionedabove,whendiscussingrisksaroundmigrationandintegration,increasedimmigrationcouldhaveapositiveeffectonIreland’sdemographicstructure.Generally,

25 Maestasetal.(2016)findsthatanageingpopulationreducesthegrowthrateofGDP,mainlydrivenbyaslowdowninthegrowthrateoflabourproductivityofworkersacrosstheagedistribution(availablehere:https://www.nber.org/papers/w22452),whileBurtless(2013)findsthat’sworkersagedbetween60-74aremoreproductivethanyoungerworkersandfindslittleevidencethatanageingworkforcehashurtproductivity(availablehere:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2275023).

26 IMFWorkingPaper:TheImpactofWorkforceAgingonEuropeanProductivity(2016).Availablehere:https://www.imf.org/en/Publica-tions/WP/Issues/2016/12/31/The-Impact-of-Workforce-Aging-on-European-Productivity-44450

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immigrantsareofaworkingagewhenenteringacountry,withthelatestCSOCensusdatashowingthatnearlyhalfofallnon-Irishnationalswereagedbetween25and42comparedwithlessthanaquarterofIrishnationals.Personsaged65yearsoroveraccountedforlessthan5percentofthenon-Irishpopulationinsharpcontrasttothenearly15percentforIrishnationalsandtheyoungeragecohort(0-14years)accountedfor12.3percentofnon-Irishnationals,comparedwith22.5percentofIrishnationals.

Predictionsofmigrationtrendscanbedifficult,astheseareinfluencedbyeconomicper-formance,howeverifnetmigrationremainspositive,i.e.thenumberofpeopleenteringIrelandisgreaterthanpeopleleaving,thiscouldimprovetheprojectednumberofpeopleintheIrishworkforceinyearstocome.

Environmental Risks: Climate Change & Biodiversity

Climateactioniscurrentlyoneofthehighest-priorityissuesformanycountries,includingIreland.Asthenumberofpeoplelivinginourcountryincreases,sotoodoesthedemandforfood,transportservices,housingetc.Increaseddemandforgoodsandservicesstem-mingfromagrowingpopulationmayresultinanincreasedcarbonfootprint.TheGovern-ment’srecentlypublishedClimateActionPlanonClimateBreakdownreferstoIreland’spredictedpopulationgrowthof1millionpeopleby2040,whichmayresultingreaterdemandfortransportacrossvariousmodes,intensifyingthedecarbonisationchallenge.

Transport,however,isnottheonlysectoroftheeconomyinwhichgreaterdemandmayleadtoanincreaseinemissions.Agriculture,touseoneotherexample,historicallyandcur-rentlyisthelargestgreenhousegas-emittingsectorinthecountry.Thereisariskthatasthepopulationincreases,wewillseerelatedincreasesindemandforhousingandtrans-port,aswellasanincreaseineconomicgrowth.Theserisks,however,maybemitigated,nowandintothefuture,asplanstotackleclimatechangetakefulleffect,andnewtech-nologiesaredeveloped.

Environmental and Technological Risks: Food Safety; Anti-Microbial Resistance; and Major Pandemics

AsdiscussedinPart2above,pressureontheprovisionofhealthcareinIrelandwillin-creaseduetoincreasesinthepopulationintheolderagecohort.Risksaround‘FoodSafety’,‘Anti-MicrobialResistance’and‘MajorPandemics’,asdiscussedinthemainreport,couldbeexacerbatediftheseriskscometopass.Itisalsoworthnotingthattheserisks,havingmajorhealthconsequences,couldpotentiallydisproportionallyaffectolderpeople,whichcouldplaceevengreaterpressureonthehealthsystemanditscapacitytodealwithsuchacrisis.

Conclusion

IntakingacloserlookatthechangingstructureandprojectedfuturetrendsinIreland’spopulation,andsettingthesetrendsagainstanInternationalbackdrop,itisclearthatIreland’spopulationisageing,inlinewithtrendsevidentinmanyothernations.Thesechangesbringaboutsignificantrisksandimplicationsforfutureplanning,bothhereandelsewhere.

TheserisksarediscussedthroughoutPart2ofthispiece,highlightingthosesectorsthat

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aremostvulnerabletopopulationchangesandtheeffectsofanageingpopulation.Whilethesesectorsareseenasmostatrisk,wecanseefromPart3thattheimplicationsofachangingdemographicstructurearetrulycross-cutting,impactingon,andinsomecasesexacerbatingmanyoftherisksfacingIrelandcurrently.

Inthiscontext,whilesomeofthechangesandimplicationsmaybeviewedasmediumorlonger-termtrends,theimplicationsaresowide-rangingandpervasiveastounderscoretheimportanceofcontinuingtoplannowfortheconsequencestheymaybringacrossallsphereswithinIreland’seconomyandsociety.

Thesedemographictrends,asadriveracrossarangeofrisks,thereforehighlighttheimportanceofpolicyresponsesincludingincreasingtheStatePensionAge,increasingparticipationratesofolderpeopleintheworkforce,increasingsavingsforprivatepensionprovision,deliveringonreformsforhealthcareandthehealthsystem,andconsiderationofpoliciesthatwouldstemthefurtherdeclineinfertilityandbirthrates,inworkingtomiti-gatetherisksofageingpopulation.

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Annex 3. Snapshot of results from public consultation

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Annex 4. National Risk Assessment Public Consultation – groups/individuals that made a submission

ApartmentOwnersNetworkBirdWatchIrelandCARICiscoErviaEuropeanPlatformAgainstWindFarmsFeastaGetupandGoals,APartnershipwithAfricaICMSAIrishCongressofTradeUnionsIrishEnvironmentalNetworkIrishFarmersAssociationPegasusRiskConsultingc.640PrivateIndividualsSeánFleming,T.D.andSenatorMarkDalySocialJusticeIrelandSocietyofCharteredSurveyorsIrelandUnionofStudentsinIrelandZeroWasteAllianceIreland

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Annex 5. National Risk Assessment Public Consultation – risks highlighted by respondents

Thefollowingtablesummarisestheriskshighlightedbythe650+respondentstothepublicconsultation.ItalsooutlineshowtherisksarereflectedinthefinalReport,asappropriate.

Theresponsesweresubmittedinanswertothequestion:‘Have the correct strategic risks been identified or are there other significant risks that should be included?’

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gov.ie