Central Bank Governor Gabriel Makhlouf has said the recovery of the economy may be "bumpy and uneven" and that some sectors will thrive as others continue to struggle.

He also warned that a lack of housing supply means the potential is there for significant house price growth this year and next.

Governor Makhlouf was speaking at the publication of the Central Bank's Financial Stability Review today.

The Central Bank's Financial Stability Review takes a broad look at the risks facing the country's banks, businesses and households.

The review notes that Government support schemes have been critical to avoiding or delaying financial distress.

It also notes that unlike the global financial crisis a decade ago, the banking system has absorbed the shock of Covid-19 and it left key capital reserve requirements for banks unchanged today.

However, it warns that the viability of some businesses will be tested when supports are scaled back.

It also cautions that Government debt is now much higher and vulnerable to a shock if conditions in international financial markets change.

The Governor of the Central Bank has said that the full impact of the economic shock of the pandemic is still to come and that businesses that were not viable before the pandemic will "probably fail" when Government supports end.

Gabriel Makhlouf told the News at One that the challenge is to manage the fallout of the pandemic in the most effective way possible to avoid exacerbating a challenging situation.

We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences

He said that banks, lenders and creditors must work in tandem with the withdrawal of Government supports to ensure there is a return "to more normality" that is as balanced as possible.

Mr Makhlouf said the Central Bank expects these lenders to play their part in ways that they have been already been, by providing forbearance and permitting payment breaks.

He said the supports and the actions by banks and other lenders and creditors to date have helped to manage the financial distress felt by businesses and households.

The Central Bank's Financial Stabilty Review shows the financial system has the capacity to support households and businesses in a crisis situation, which reflects the improvements in the system since the last financial crisis.

Mr Makhlouf said that there is a need to avoid a cliff-edge in the withdrawal of supports for businesses and households, adding that the Government programme in this regard to the end of the year is "consistent" with a gradual tapering of supports.

We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences

The Central Bank also said today that it is undertaking a review of its mortgage lending rules.

As part of this, members of the public are invited to participate in an online survey to give their views.

The mortgage measures, first introduced in February 2015, are aimed at enhancing the resilience of both borrowers and the banking sector.

The measures set limits on the size of mortgages that consumers can borrow through the use of loan-to-value (LTV) and loan-to-income (LTI) limits.

Governor Makhlouf said the review of the mortgage lending rules will ensure that the rules play a part in dealing with the ongoing supply problems in the property market.

He said the rules have been successful in limiting mortgage borrowings and are designed to avoid reckless lending and reckless borrowing.

"The role of the mortgage measures in guarding against the over indebtedness of households and protecting financial stability is clear," Gabriel Makhlouf said.

"However, as a permanent feature, it is important that we not only maintain the good practice of regularly reviewing the calibration of policy but also consider the overarching framework," he said.

"It is now approaching seven years since the introduction of the measures and a review of the framework will allow us to consider the overarching approach to our toolkit and strategy to ensure they continue to remain fit for purpose in view of the constant evolution of our financial system and economy," he added.