Gabriel Makhlouf: The tangle of ageing populations and productivity growth

Remarks by Mr Gabriel Makhlouf, Governor of the Central Bank of Ireland, at the Society of Professional Economists, London, 25 November 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Good evening.

I am delighted to speak here today, at the invitation of the Society of Professional Economists.  It is always a pleasure to be back in London.

Connections between the Ireland and the UK – be they economic, political, cultural or familial, and often all four together – go back centuries.   In central banking, the London connection stretches back to the earliest days of the Irish Free State.   For the first half-century or so of Irish independence, the monetary systems of Ireland and the UK were fully integrated.  A 'London Agency' located in the Bank of England was set up towards the end of the 1920s by the Currency Commission, a precursor to the Central Bank of Ireland. Initially, its main purpose was to allow for the exchange at parity of the Irish pound for Sterling, thereby preserving the so-called "link with Sterling". Over time, the Agency evolved to become a forum for direct and confidential discussions on economic and financial developments of the day, contributing to what one former Governor described as the "intimate connection" between Ireland and the Sterling area.

The London Agency is long gone, but I hope that my presence here today contributes to the enduring connection between two close neighbours. Though not so intimate a connection these days, the UK remains an important trading partner, accounting for some 15% of Irish trade, albeit far below the 50% share seen in the 1980s.³ And while Ireland is now part of another currency union with 19 other euro area countries, as two large financial centres there are common areas of interest, especially during crisis episodes. 

The focus of my speech today is two inter-related challenges that will have a large bearing on economic policy in the coming years: demographic change and productivity growth.

The policy focus is naturally a European or euro area one, but these are also challenges for the UK.