AIB Group plc · EURONEXT:A5G

AIB — The Irish Economic May 2021

18 slides from AIB's investor presentation, May 2021

  1. Slide 1: The Irish Economic Update: Tough start to 2021, but prospects brighten

    The Irish Economic Update: Tough start to 2021, but prospects brighten as vaccine rollout sees economy reopening May 2021 Oliver Mangan Chief Economist AIB 1

  2. Slide 2: Economy starts reopening from long third lockdown

    Economy starts reopening from long third lockdown  Irish GDP grew by 3.4% in 2020, with GNP up 0.6%, as exports increased by 6.2%  Domestic economy contracted by 5.4%, with consumer spending down 9% and fixed investment falling by 8.5%, partially offset by 9.8% rise in government expenditure  Lon

  3. Slide 3: Goods exports up strongly last year, services exports flat

    Goods exports up strongly last year, services exports flat  Ireland a very open economy – exports, driven Exports as % of GDP by large scale FDI, are a huge part of economy Finland  UK Exports rise strongly in recent years, helped by Germany large FDI inflows France  Total exports rose 10.4% in 2

  4. Slide 4: Strong economic rebound followed big Covid hit in H1'20

    Strong economic rebound followed big Covid hit in H1’20 Construction Output % (Volume, YoY% Change)  Modified final domestic demand up by 18.8% in Q3, 30 20 with small fall of 2.2% in Q4, after big H1’20 decline 10  Overall, modified domestic demand contracted by 0 -10 5.4% in 2020. It was running

  5. Slide 5: But domestic recovery interrupted by new lockdowns

    But domestic recovery interrupted by new lockdowns % Modified* Final Domestic Demand Employment (YoY, %) % (% Yr-on-Yr) 8 10 Private 6 5 4 0 2 -5 Total Public 0 -10 -2 -15 -4 -20 Q4 2014 Q4 2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019 Q4 2020 -6 Source: CSO (*Excludes imports of I.P. & Aircraft Leasing) via

  6. Slide 6: Weak start to 2021, but lead indices now starting to pick up

    Weak start to 2021, but lead indices now starting to pick up AIB Irish Mfg and Services PMIs Ulster Bank Construction PMI 80 70 Services 60 70 60 50 50 40 40 30 Manufacturing 30 20 20 10 10 0 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Source: Re

  7. Slide 7: House building likely to fall back given big decline in starts

    House building likely to fall back given big decline in starts  Total completions amounted to 20,676 in 2020, just 2% Irish Housing Activity down on 2019 level despite a 6-week lockdown 40,000 35,000  Commencements fell by over 17% to 21,700 in 2020 30,000 from 26,240 in 2019. Further big fall at

  8. Slide 8: House price inflation up to 3% in early 2021 and rising

    House price inflation up to 3% in early 2021 and rising  House prices declined by very sharp 55% over 2007-13 % National House Price Inflation % 6 24  Prices have recovered strongly; 88.5% above trough by 5 20 Feb’21, but still some 15.5% below 2007 peak 4 16  3 12 CSO data show house prices litt

  9. Slide 9: 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 32,000 31,000 25,000 25,000  Shortage of housing, high rents, Formation tighter lending rules saw average of which h

  10. Slide 10: Private sector deleverages, Gov. debt ratios move higher

    Private sector deleverages, Gov. debt ratios move higher Irish Household Debt Ratio Irish Private Sector Credit (Inc Securitisations) as % GNI* % (% of Disposible Income) % 220 350 200 300 250 180 200 160 150 140 100 120 50 100 0 Q3 2002 Q3 2004 Q3 2006 Q3 2008 Q3 2010 Q3 2012 Q3 2014 Q3 2016 Q3 201

  11. Slide 11: Big 2020-21 budget deficits to decline sharply over 2022-23

    Big 2020-21 budget deficits to decline sharply over 2022-23  Budget deficit fell sharply in last decade, with 2 General Government Balance* (% GDP) small surpluses recorded in 2018 and 2019 0  However, Covid-19 and efforts to mitigate it saw -2 the public finances deteriorate during 2020 -4  Tax

  12. Slide 12: Economy was in very strong shape ahead of Covid shock

    Economy was in very strong shape ahead of Covid shock  Economy was in very strong shape ahead of being hit by very deep 2020 Covid recession  Well balanced, robust underlying growth of circa 5% per annum over 2013-19 period  Large inflows of FDI and strong export growth remain key features of the

  13. Slide 13: Factors in place for a strong rebound by Irish economy

    Factors in place for a strong rebound by Irish economy  Key ingredients for a strong rebound by Irish economy IMF GDP Forecasts (April 2021) from mid-2021 onwards moving into place % Vol 2020 2021 2022  Rollout of vaccines gathering momentum, which World -3.3 6.0 4.4 should allow big reopening of

  14. Slide 14: AIB Irish Economic Forecasts

    AIB Irish Economic Forecasts % change in real terms unless 2019 2020 2021 (f) 2022 (f) 2023 (f) stated GDP 5.6 3.4 3.0 5.5 4.0 GNP 3.4 0.6 2.5 5.0 3.5 Modified Final Domestic Demand 3.3 -5.4 2.8 5.5 3.5 Personal Consumption 3.2 -9.0 3.0 7.5 4.0 Government Spending 6.3 9.8 1.5 -3.0 1.0 Fixed Investme

  15. Slide 15: Brexit: The EU-UK Trade & Cooperation Agreement

    Brexit: The EU-UK Trade & Cooperation Agreement The Trade Deal:  EU and UK finally agreed on a trade deal before end 2020, thereby allow for continuing tariff-free and quota-free trade in goods  However, the FTA is much inferior to the EU Single Market, involves a lot of extra admin costs and dela

  16. Slide 16: Ireland's 12.5% Corporate Tax regime under threat

    Ireland’s 12.5% Corporate Tax regime under threat Importance of FDI:  Some 1,600 multinational companies are based in Ireland, accounting for over 250,000 in direct employment or about 18% of total jobs in terms of direct and indirect employment.  Corporation tax accounts for €12bn or circa 20% of

  17. Slide 17: Tax changes coming, but Ireland still has advantages

    Tax changes coming, but Ireland still has advantages Ireland will remain attractive FDI location:  Big multinationals will still need to retain large global operations, whatever happens in the tax field  US companies require employees with language skills to service European customers in European

  18. Slide 18: Reprise of risks to the Irish economy

    Reprise of risks to the Irish economy  Main near term risk is still Covid-19 – continues to weigh heavily on growth & employment  Virus could leave lasting scarring effects – high business failures & bad debts, job losses  Very open nature of Irish economy means it is exposed to any weakening in

AIB Group — The Irish Economic May 2021 on 6ix