Aib Group Plc · EURONEXT:A5G

Aib — The Irish Economic October 2021

18 slides from Aib's investor presentation, October 2021

  1. Slide 1: The Irish Economic Update

    The Irish Economic Update: Strong summer rebound continuing, with last of Covid-19 restrictions due to go this month October 2021 Oliver Mangan Chief Economist AIB 1

  2. Slide 2: Economy rebounds strongly as lockdowns end

    Economy rebounds strongly as lockdowns end Construction Output  % (Volume, YoY% Change) GDP grew by 5.9% in 2020, with GNP up 3.4% 40  30 Modified final domestic demand fell by 4.9% and 20 modified gross national income down 3.5% in 2020 10  Third lockdown saw GNP contract by 3% in Q1 2021 0 -10

  3. Slide 3: Very big rebound in activity as restrictions are eased

    Very big rebound in activity as restrictions are eased  Restrictions started to be lifted during Q2 after long third lockdown imposed in Q1  Indicators point to very strong rebound in activity in Q2 and Q3 after lockdown ended  Mfg PMI hit record high of 64.1 in May, and stays well above 60 over

  4. Slide 4: Indicators pick up strongly as economy reopens

    Indicators pick up strongly as economy reopens AIB Irish Mfg and Services PMIs Ulster Bank Construction PMI 70 70 60 60 50 50 40 Manufacturing 40 30 30 20 20 Services 10 10 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21 0 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21 Source: Refinitiv Consumer

  5. Slide 5: Unemployment declining rapidly, inflation on the rise

    Unemployment declining rapidly, inflation on the rise % Employment (YoY, %) Unemployment Rate 12 32 28 9 Covid-19 Adjusted Rate Private 24 6 20 3 Total 16 0 Public 12 Traditional Rate -3 8 -6 4 -9 0 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020 Q2 2021 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug

  6. Slide 6: Exports perform very strongly throughout the pandemic

    Exports perform very strongly throughout the pandemic  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  Pharma, medical care products, IT

  7. Slide 7: House building holds up, while commencements rebound

    House building holds up, while commencements rebound  Total completions amounted to 20,535 in 2020, just Irish Housing Activity 2.6% down on 2019 level despite a 6-week lockdown 40,000 35,000  Big jump in planning permissions in past couple of years 30,000  25,000 Commencements fell by over 17% t

  8. Slide 8: House prices on marked upward trend

    House prices on marked upward trend  House prices declined sharply, by 55% over 2007-13 % 2.5 National House Price Inflation % 15.0  Prices have since recovered strongly, but still 11% below 2.0 12.0 1.5 9.0 2007 peak 1.0 6.0  CSO data show house prices little changed over 2019- 0.5 3.0 20, until

  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 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 Q1 2003 Q1 2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1 2017 Q1 201

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

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

  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: Elements in place for return to strong Irish economic growth

    Elements in place for return to strong Irish economic growth  Key ingredients in place for a strong rebound by Irish OECD Global GDP Forecasts economy from 2021 onwards % Vol 2020 2021 2022  Rollout of vaccines allows economies to reopen here World -3.4 5.7 4.5 OECD -4.8 5.3 3.8 and elsewhere – ve

  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 4.9 5.9 8.0 5.5 4.0 GNP 5.0 3.4 5.5 5.0 3.5 Modified Final Domestic Demand 1.7 -4.9 4.0 5.3 3.7 Personal Consumption 3.3 -10.4 3.7 7.5 4.0 Government Spending 7.1 10.9 1.7 -1.5 1.0 Fixed Invest

  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 at risk

    Ireland’s 12.5% Corporate Tax regime at risk 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 tota

  17. Slide 17: Ireland has other advantages besides low tax rate

    Ireland has other advantages besides low tax rate 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 tim

  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 – high case numbers, concerns about new variants  Virus could leave lasting scarring effects – rising business failures & bad debts, job losses  Very open nature of Irish economy means it is exposed to any weakening in g

AIB Group — The Irish Economic October 2021 on 6ix