Slide 1: The Irish Economic Update: Deep COVID-19 recession, but resilient
The Irish Economic Update: Deep COVID-19 recession, but resilient Irish economy can bounce back May 2020 Oliver Mangan Chief Economist AIB 1
Slide 2: Coronavirus pandemic triggers deep recession
Coronavirus pandemic triggers deep recession Ireland hit by deep recession in H1 2020 as economy put into lockdown to contain coronavirus Rising unemployment, with over 1 million workers enrolled on State income support schemes Jobless rate soars to 16.5% in March, and expected to climb above
Slide 3: Activity data begin to show initial impact of COVID-19
Activity data begin to show initial impact of COVID-19 Unemployment rate spikes from 4.8% in Feb to COVID-19 adjusted figure of 16.5% in March Over 1 million workers either in receipt of Pandemic Unemployment Benefit / standard unemployment benefit or enrolled on State’s temporary wage subsidy s
Slide 4: Data deteriorate on COVID-19 related restrictions
Data deteriorate on COVID-19 related restrictions 65 AIB Irish Mfg and Services PMIs Consumer Confidence (ESRI - KBC) 120 Services 60 100 55 50 Manufacturing 80 45 40 60 35 30 40 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Source: R
Slide 5: COVID recession comes after strong growth in 2013-2019
COVID recession comes after strong growth in 2013-2019 Previous Irish recession of 2008-2009 also severe. GDP fell 9.5%, with GNP down 12% Collapse in construction activity and banking system, severe fiscal tightening, high unemployment. Ireland entered a 3 year EU/IMF assistance programme from
Slide 6: Economy still performing very well before virus struck
Economy still performing very well before virus struck % Retail Sales (ex-autos) - Volume, YoY, % Modified Final Domestic Demand and Employment 8 % % 8.00 5.0 7 6.00 4.0 6 3.0 4.00 5 2.0 2.00 4 1.0 0.00 3 0.0 2 -2.00 -1.0 1 -4.00 -2.0 0 -6.00 -3.0 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2
Slide 7: Large Irish export base has seen strong growth
Large Irish export base has seen strong growth Exports as % of GDP Ireland a very open economy – exports, driven Finland by large scale FDI, are a huge part of economy UK Exports rise strongly in recent years, helped by Germany France large FDI inflows Italy Total exports rose by 10.4% in 2018
Slide 8: Domestic demand solid ahead of the pandemic
Domestic demand solid ahead of the pandemic Construction Output Construction sees strong recovery since 2013. % 20 (Volume, 3 Qtr Moving Average, YoY% Change) Output up nearly 12% on average in 2016-18 period Slowdown in non-residential construction activity 16 last year – construction output up
Slide 9: House building on steady rise before virus halted activity
House building on steady rise before virus halted activity Housing completions up 18% yoy to over 21,000 units Irish Housing Activity in 2019, a moderation on 2018’s 25% growth rate 40,000 35,000 Housing commencements increase by further 17% in 30,000 2019 to 26,000 units 25,000 20,000 Plannin
Slide 10: House price inflation slows sharply
House price inflation slows sharply House prices declined by a very sharp 55% % National House Price Inflation % 5 25 between their peak in late 2007 and early 2013 4 20 House prices have since rebounded as big housing 3 15 shortage emerged after 90% fall in home building 2 10 Prices up 83% by
Slide 11: AIB Model of Estimated Housing Demand
AIB Model of Estimated Housing Demand Rising headship rates added circa Calendar Year 2017 2018 2019 2020 2021 8,000 per year to housing demand in 2002-2011 period Household 28,000 28,500 28,000 28,000 28,000 Shortage of housing, high rents, Formation tighter lending rules saw average of which h
Slide 12: Govt. debt ratios had fallen, private sector deleverages
Govt. debt ratios had fallen, private sector deleverages Government Debt Ratios (%) % 130 % 10 Gov Debt Interest (% GDP) 120 Gen Gov Net Debt /Modified Gross National Income Ratio 8 110 100 6 90 80 4 70 General Gov Gross Debt/GDP Ratio 60 2 50 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020(f) 202
Slide 13: Large budget deficit in 2020, but bond yields stay very low
Large budget deficit in 2020, but bond yields stay very low Budget deficit declined sharply over last decade, 2 General Government Balance* (% GDP) with small surpluses recorded in 2018 and 2019 0 Primary budget surplus (i.e. excluding debt -2 interest) of near 2% of GDP in 2019 -4 Debt intere
Slide 14: Key medium-term Irish growth drivers remain in place
Key medium-term Irish growth drivers remain in place Favourable medium-term drivers of strong Irish growth remain in place Irish GDP Forecasts House building picking up from still low output % Vol 2020 2021 levels – big focus of next government IMF -6.8 6.3 Government spending supportive of gr
Slide 15: Brexit: EU-UK trade talks delayed- extension possible
Brexit: EU-UK trade talks delayed- extension possible EU and UK agreed on revised Brexit deal at last October’s Heads of State Summit NI to remain within Single Market for goods and have dual EU-UK customs system UK left the EU on Jan 31st 2020 in orderly exit. Transition period in place until
Slide 16: Risks to the Irish economy
Risks to the Irish economy Main near-term risk is obviously the coronavirus – will weigh heavily on growth this year Persistence of virus or fresh outbreak could delay global/Irish recoveries Highly open nature of Irish economy means it is quite exposed to a global recession Brexit remains a