Aib Group Plc · EURONEXT:A5G

Aib — The Irish Economic January 2023

16 slides from Aib's investor presentation, January 2023

  1. Slide 1: The Irish Economic Update: Much slower, but still solid growth expected in 2023

    The Irish Economic Update: Much slower, but still solid growth expected in 2023, after stellar year in 2022 January 2023 Oliver Mangan Chief Economist AIB 1

  2. Slide 2: Economy rebounds very strongly in 2021-22 from COVID

    Economy rebounds very strongly in 2021-22 from COVID Consumer Spending  GDP grew by 13.6% in 2021, with GNP up by 14.7% - % 15 (Volume, 3 QTR Moving Average, YoY% Change) trade flows again boosted data 10  Domestic economy picked up strongly in 2021, with 5 modified final domestic demand rising by

  3. Slide 3: But clear signs that growth slowing after strong H1'22

    But clear signs that growth slowing after strong H1’22 AIB Irish Mfg and Services PMIs % 70 Retail Sales (ex-autos) - Volume, YoY 20 60 15 10 50 Manufacturing 5 40 0 30 Services -5 20 -10 10 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 -15 Q3 2016 Q3 2017 Q3 2018 Q3 2019 Q3 2020 Q3 2021 Q3 2022

  4. Slide 4: PMIs and retail sales data point to softening activity

    PMIs and retail sales data point to softening activity  Mfg PMI at strong levels into early summer, before falling sharply to below 50 by Nov/Dec  Services PMI still solid, but well off H1 2022 peaks. At 52.7 in December  Housing commencements surged to 35k peak by March, but fell back to 27k by

  5. Slide 5: Unemployment falls to very low level, inflation rises sharply

    Unemployment falls to very low level, inflation rises sharply % Employment (YoY, %) Unemployment Rate 15 8.0 Private 12 7.5 9 7.0 Total 6 6.5 3 6.0 0 Public 5.5 -3 5.0 -6 4.5 -9 4.0 Q3 2016 Q3 2017 Q3 2018 Q3 2019 Q3 2020 Q3 2021 Q3 2022 Source: CSO via Refinitiv Nov-16 Nov-17 Nov-18 Nov-19 Nov-20 N

  6. Slide 6: Exports perform very strongly in 2021-22 as FDI surges

    Exports perform very strongly in 2021-22 as FDI surges Exports as % of GDP  Ireland is a very open economy – exports, driven by Finland large scale FDI, are a huge part of economy UK  Exports have risen strongly in recent years, helped Germany by very large FDI inflows France  IDA reported record

  7. Slide 7: House completions pick up, but commencements fall back

    House completions pick up, but commencements fall back  Completions amounted to 20,500 in 2020 & 2021, 35,000 Irish Housing Activity just 2.6% down on 2019 level despite lockdowns 30,000  12 month total for completions picked up to near 25,000 28K by Q3’22 on rebound from COVID lockdowns 20,000 

  8. Slide 8: House price growth and rent inflation now moderating

    House price growth and rent inflation now moderating  House prices declined sharply, by 55% over 2007-13. % National House Price Inflation Prices have fully recovered and back at 2007 peak level 2.5 % 18.0  2.0 15.0 Strong rise in CSO house prices in 2021. Moderation in 12.0 1.5 price rises in 202

  9. Slide 9: AIB Model of Estimated Housing Demand

    AIB Model of Estimated Housing Demand  Rising headship rates added circa Calendar Year 2020 2021 2022 2023 2024 8,000 per year to housing demand in 2002-2011 period Household 26,000 29,000 28,000 25,000 24,500  Shortage of housing, high rents, Formation tighter lending rules saw average of which h

  10. Slide 10: Private sector deleverages, Gov. debt ratios fall to low levels

    Private sector deleverages, Gov. debt ratios fall to low levels Irish Household Debt Ratio % (% of Disposible Income) % Irish Private Sector Credit (Inc Securitisations) as % GNI* 215 350 200 300 185 250 170 200 155 150 140 125 100 110 50 95 0 Q2 2002 Q2 2006 Q2 2010 Q2 2014 Q2 2018 Q2 2022 2003 200

  11. Slide 11: Strong growth sees public finances return to surplus

    Strong growth sees public finances return to surplus  General Gov. budget deficits of €18bn in 2020 and 6 General Government Balance (% GNI*) €7bn in 2021 as COVID-19 hit public finances hard  4 Tax revenues rise very strongly in 2022; up 21.5% 2 after a 20% rise in 2021 0  Corporation tax up by

  12. Slide 12: Headwinds and capacity constraints to see growth slow

    Headwinds and capacity constraints to see growth slow  Mounting headwinds and capacity constraints, but OECD Global GDP Forecasts (Nov 2022) solid growth expected by Irish economy in 2023-24  % Vol 2021 2022 2023 2024 FDI inflows to continue, boosting investment, exports World 5.9 3.1 2.2 2.7 and

  13. Slide 13: AIB Irish Economic Forecasts

    AIB Irish Economic Forecasts % change in real terms unless 2020 2021 2022 (f) 2023 (f) 2024 (f) stated GDP 5.9 13.6 11.0 4.0 3.7 GNP 3.4 14.7 7.0 3.5 3.3 Modified Final Domestic Demand -6.1 5.8 8.5 3.0 2.8 Personal Consumption -10.9 4.6 6.0 3.0 3.0 Government Spending 11.6 6.5 0.5 2.3 2.0 Fixed Inve

  14. Slide 14: Residual Brexit Issue Remains over NI Protocol

    Residual Brexit Issue Remains over NI Protocol  UK has introduced legislation to unilaterally overturn parts of the NI Protocol  The reality is that many checks on GB-NI trade are not in operation  EU has offered concessions on Protocol. Discussions have not made much progress to date  Legislati

  15. Slide 15: Changes to Corporate Tax Regime in 2023

    Changes to Corporate Tax Regime in 2023 Importance of FDI:  Some 1,600 multinational companies are based in Ireland, accounting for over 250,000 jobs in direct employment  Corporation tax receipts of €22.6bn in 2022 or 27% of total tax revenue – well over 80% comes from MNCs Changes to Corporate T

  16. Slide 16: Risks to the Irish economy outlook

    Risks to the Irish economy outlook  Very open Irish economy vulnerable to weakening global outlook, including FDI inflows  High inflation and rising interest rates will weigh on Irish activity, as elsewhere  Very reliant on energy imports so could be impacted by disruptions to European gas suppli

AIB Group — The Irish Economic January 2023 on 6ix