Aib Group Plc · EURONEXT:A5G

Aib — The Irish Economic October 2022

16 slides from Aib's investor presentation, October 2022

  1. Slide 1: The Irish Economic Update: Strong first half to 2022, but inflation rises sharply

    The Irish Economic Update: Strong first half to 2022, but inflation rises sharply with signs that growth now slowing October 2022 Oliver Mangan Chief Economist AIB 1

  2. Slide 2: Economy rebounds very strongly from COVID pandemic

    Economy rebounds very strongly from COVID pandemic  Domestic economy picked up strongly in 2021, with % Consumer Spending (Volume, 3 QTR Moving Average, YoY% Change) 15 modified final domestic demand rising by 5.8%  10 Consumer spending rose by 4.6% in 2021, with 5 domestic fixed investment up by

  3. Slide 3: Clear signs in surveys that growth slowing after strong H1

    Clear signs in surveys that growth slowing after strong H1 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 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21 Aug-22 -15 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020 Q2 2021 Q2 2

  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 to 51.8 in July, 51.1 in August  Services PMI still solid, but off peaks at 55.6 in June, 56.3 in July, 54.7 in August  Housing commencements surged to 35k peak in March, but fall ba

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

    Unemployment falls to very low level, inflation rising sharply % Employment (YoY, %) Unemployment Rate 15 9 Private 12 Total 8 9 6 7 Public 3 6 0 5 -3 -6 4 -9 3 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020 Q2 2021 Q2 2022 Source: CSO via Refinitiv Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21 Aug-22 % Modifi

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

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

  7. Slide 7: House building picks up after commencements rise

    House building picks up after commencements rise  Completions amounted to 20,500 in 2020 & 2021, Irish Housing Activity just 2.6% down on 2019 level despite lockdowns 35,000  12 month total for completions picked up to 25,000 30,000 25,000 in Q2’22 as sector recovered from COVID lockdowns 20,000 

  8. Slide 8: Sharp upward trend in house prices starts to moderate

    Sharp upward trend in house prices starts to moderate  House prices declined sharply, by 55% over 2007-13 % 2.5 National House Price Inflation % 18.0  Prices have fully recovered and back at 2007 peak level 2.0 15.0 12.0  1.5 Strong rise in CSO house prices in 2021, especially in H2 1.0 9.0  6.0

  9. Slide 9: AIB Model of Estimated Housing Demand

    AIB Model of Estimated Housing Demand  Rising headship rates added circa Calendar Year 2019 2020 2021 2022 2023 8,000 per year to housing demand in 2002-2011 period Household 31,000 22,500 20,500 23,000 24,000  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 Irish Private Sector Credit (Inc Securitisations) as % GNI* % (% of Disposible Income) % 220 350 200 300 180 250 160 200 140 150 120 100 50 100 0 80 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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

    Strong growth sees public finances return to surplus  Budget surpluses recorded in 2018 and 2019 6 General Government Balance (% GNI*)  General Gov. budget deficits of €18bn in 2020 4 and €7bn in 2021 as COVID-19 hit public finances 2  Tax revenues very strong in 2022; up 26% to end 0 -2 August a

  12. Slide 12: Solid Irish economic growth forecast despite headwinds

    Solid Irish economic growth forecast despite headwinds  Continued solid growth expected by Irish economy, OECD Global GDP Forecasts (Sept 2022) despite mounting headwinds % Vol 2021 2022 2023  Very high Irish vaccination rates against Covid-19, with World 5.8 3.0 2.2 all restrictions on activity l

  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 8.0 4.0 3.7 GNP 3.4 14.7 6.0 3.5 3.3 Modified Final Domestic Demand -6.1 5.8 4.7 3.0 2.8 Personal Consumption -10.9 4.6 5.0 3.0 3.0 Government Spending 11.6 6.5 1.0 2.3 2.0 Fixed Inves

  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 €15.3bn in 2021 or 22.5% of total tax revenue – over 80% comes from MNCs Changes to Corporate Tax

  16. Slide 16: Risks to the Irish economy outlook

    Risks to the Irish economy outlook  Very open Irish economy vulnerable to global downturn, especially in advanced economies  High inflation, weakening global economy, rising interest rates risks to Irish growth  Very reliant on energy imports, and could be impacted by disruption to European gas s

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