AIB Group plc · EURONEXT:A5G

AIB — The Irish Economic February 2020

20 slides from AIB's investor presentation, February 2020

  1. Slide 1: The Irish Economic Update: Another year of good growth in prospect

    The Irish Economic Update: Another year of good growth in prospect February 2020 Oliver Mangan Chief Economist AIB 1

  2. Slide 2: Strong growth by Irish economy over 2013-2019

    Strong growth by Irish economy over 2013-2019  Very severe recession in Ireland in 2008-2009. GDP fell by 8.5% and GNP down 11%  Collapse in construction activity and banking system, severe fiscal tightening, high unemployment. Ireland entered a 3 year EU/IMF assistance programme from 2010-2013 

  3. Slide 3: Survey data have weakened, but growth remains solid

    Survey data have weakened, but growth remains solid 65 AIB Irish Mfg and Services PMIs Consumer Confidence (ESRI - KBC) 120 Services 60 100 55 80 Manufacturing 50 60 45 40 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Source: Refiniti

  4. Slide 4: Real indicators hold up, despite weaker survey data

    Real indicators hold up, despite weaker survey data  Still strong jobs growth – employment rose by 2.4% yoy in Q3 2019, but slower than in previous years  Downtrend in unemployment rate continues, as it drops below 5% in H2 2019  Housing completions up strong 18% yoy to end Q3 2019, though slower

  5. Slide 5: Jobs growth still solid, unemployment rate drops below 5%

    Jobs growth still solid, unemployment rate drops below 5% Year Average 2016 2017 2018 2019(f) 2020(f) 2021(f) Unemployment Rate % 8.4 6.8 5.8 5.0 4.8 4.7 Labour Force Growth % 1.9 1.1 1.8 1.8 1.6 1.8 Employment Growth % 3.7 2.9 2.9 2.6 1.8 1.9 Net Migration : Year to April (‘000) 16.2 19.8 34.0 34.0

  6. Slide 6: Large Irish export base performing very well

    Large Irish export base performing very well  Ireland a very open economy – exports, driven by Exports as % of GDP enormous FDI, equate to well over 100% of GDP Finland UK  Major gains in Irish competitiveness earlier in Germany decade – though wage growth now picking up France  Exports rise stro

  7. Slide 7: FDI and the Irish economy

    FDI and the Irish economy WHAT ATTRACTS FDI TO IRELAND? KEY FDI IMPACTS ON THE IRISH ECONOMY - Access to European markets - 1,550 multinational companies now in Ireland - Low corporate tax rate of 12.5% - 33% of MNCs have been here for more than 20 years - English speaking country - 63% of new MNCs

  8. Slide 8: Domestic economy has rebounded strongly

    Domestic economy has rebounded strongly Construction Output  Construction sees strong recovery since 2013. Output % 20 (Volume, 3 Qtr Moving Average, YoY% Change) up nearly 12% on average in 2016-18 period 16  Slowdown in non-residential construction activity last 12 year – construction output up

  9. Slide 9: House building on the rise, but still at quite a low level

    House building on the rise, but still at quite a low level  Housing completions up 18% yoy in Q1-Q3 2019 after 30,000 CSO Housing Completions rising by 25% to over 18,000 in 2018 25,000  Housing commencements rose 25% yoy to end Q3 20,000 2019 following a 28% increase in 2018 15,000  Planning per

  10. Slide 10: House price inflation slows sharply

    House price inflation slows sharply  House prices declined by a very sharp 55% between % 5 National House Price Inflation % 25 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  1 5 Prices up 86

  11. Slide 11: AIB Model of Estimated Housing Demand

    AIB Model of Estimated Housing Demand  Rising headship rates added circa Calendar Year 2016 2017 2018 2019 2020 8,000 per year to housing demand in 2002-2011 period Household 26,500 26,500 26,500 27,500 27,500  Shortage of housing, high rents, Formation tighter lending rules saw average of which h

  12. Slide 12: Govt debt ratios fall, private sector deleverages

    Govt debt ratios fall, private sector deleverages % Government Debt Ratios (%) % Gov Debt Interest (% GDP) 10 130 120 Gen Gov Net Debt /Modified 8 Gross National Income Ratio 110 100 6 90 4 80 70 General Gov Gross Debt/GDP Ratio 2 60 50 0 2011 2012 2013 2014 2015 2016 2017 2018 2019(f) 2020(f) 2021(

  13. Slide 13: Government finances return to surplus in 2018/19

    Government finances return to surplus in 2018/19  Budget deficit declined sharply over last decade. 2 General Government Balance* (% GDP) (Based on a Soft Brexit) Fell to 0.2% of GDP by 2017 0  A small surplus of €170m was recorded in 2018 -2  Public finances were ahead of target last year – -4 s

  14. Slide 14: Brexit: Difficult trade talks lie ahead in 2020

    Brexit: Difficult trade talks lie ahead in 2020  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 to last until end 20

  15. Slide 15: Brexit expected to lower growth rate of Irish economy

    Brexit expected to lower growth rate of Irish economy  Multiple hits to the Irish economy if there is a no EU-UK Trade deal at end of transition period: further collapse in sterling, recession in UK, disruption to trade/supply lines, tariffs, new administration and regulatory costs etc  Sharp fall

  16. Slide 16: Agri. sector would be severely impacted if no trade deal

    Agri. sector would be severely impacted if no trade deal Share of Exports by Industry Destined for the UK (ESRI)  Main EU tariffs relate to food products, keeping prices high. 50% UK may impose tariffs on all 45 % food imports if no trade deal 40%  Food and Beverages account 35% 30 % for 25% of to

  17. Slide 17: AIB Brexit Sentiment Index – Q3 2019

    AIB Brexit Sentiment Index – Q3 2019  A total of 700 SME’s (with up to 250 employees) across the island of Ireland  Headline index weak again in Q3. One of the most notable features of the survey this year is the number of firms that say Brexit is having a negative impact on their business  Manuf

  18. Slide 18: Good Irish growth can continue if external risks avoided

    Good Irish growth can continue if external risks avoided Irish, Eurozone & UK Inflation (HICP Rates)  5 Irish economy should continue to grow at impressive 4 pace, but not as strongly as in recent years Eurozone 3  House building picking up from still low output levels 2 UK  Public spending on th

  19. Slide 19: AIB Irish Economic Forecasts

    AIB Irish Economic Forecasts % change in real terms unless 2017 2018 2019 (e) 2020 (f) 2021 (f) stated GDP 8.1 8.2 5.5 4.0 3.0 GNP 5.1 6.5 3.0 3.7 2.75 Personal Consumption 3.0 3.4 3.5 3.0 2.5 Government Spending 3.9 4.4 4.0 3.0 3.0 Fixed Investment -6.6 -21.1 48.0 5.0 5.0 Core Fixed Investment* 4.0

  20. Slide 20: Risks to the Irish economy

    Risks to the Irish economy  Main near-term risks to the Irish economy are external  Brexit still a big concern for Ireland given uncertainty about future EU-UK trading relationship  Weaker external environment, with downside risks to global growth from increasing protectionism/tariffs, declining

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