AIB Group plc · EURONEXT:A5G

AIB — The Irish Economic September 2022

16 slides from AIB's investor presentation, September 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 of slower growth ahead September 2022 Oliver Mangan Chief Economist AIB 1

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

    Economy rebounds very strongly from COVID pandemic Consumer Spending % (Volume, 3 QTR Moving Average, YoY% Change)  GDP grew by 6.2% in 2020, with GNP up 2.7%, but 15 10 modified final domestic demand fell by 6.1%  Domestic economy picked up strongly in 2021, with 5 0 modified final domestic deman

  3. Slide 3: Strong performance in H1 2022, though inflation surging

    Strong performance in H1 2022, though inflation surging  Indicators show the very strong rebound in activity in 2021 continued in H1 2022  Mfg PMI has remained at strong levels into early summer, though then fell to 51.8 by July  Services PMI still high, but off peaks at 55.6 in June and 56.3 in

  4. Slide 4: Clear signs in surveys that growth is starting to slow

    Clear signs in surveys that growth is starting to slow 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 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jul-21 Jul-22 -15 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020 Q2 2021 Q2 2022

  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 32 Private 12 28 Total Covid-19 Adjusted Rate 9 24 6 20 Public 3 16 0 12 Traditional Rate -3 8 -6 4 -9 0 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020 Q2 2021 Q2 2022 Source: CSO via Refinitiv Jul-17

  6. Slide 6: Exports perform impressively throughout the pandemic

    Exports perform impressively throughout the pandemic  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 large FDI inflows – though growth overstated  France

  7. Slide 7: House building picking up as commencements rise

    House building picking up as commencements rise  Completions amounted to 20,500 in 2020 & 2021, 40,000 Irish Housing Activity just 2.6% down on 2019 level despite lockdowns 35,000  30,000 Big jump in planning permissions since 2018 25,000  20,000 Commencements fell by over 17% to 21,700 in 2020 1

  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 CSO data show house prices little changed over 2019-20 1.0 9.0  6.0 St

  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 resume downtrend

    Private sector deleverages, Gov. debt ratios resume downtrend 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 20

  11. Slide 11: Public finances head back into surplus

    Public finances head back into surplus  Budget surpluses recorded in 2018 and 2019 2 General Government Balance (% GDP)  General Gov budget deficit of €18.4bn in 2020, or 0 5% of GDP, as Covid-19 hit public finances  -2 Strong rebound in tax receipts in 2021 – up 20% -4 & 15% higher than 2019. Co

  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 (June 2022) despite mounting headwinds % Vol 2021 2022 2023  Very high Irish vaccination rates against Covid-19, with World 5.8 3.0 2.8 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  EU has offered concessions on Protocol. Discussions with UK have not made much progress  Legislation will take a considerable time to enact and get through Parliament 

  15. Slide 15: Changes to Corporate Tax Regime Agreed

    Changes to Corporate Tax Regime Agreed 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 R

  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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