AIB Group plc · EURONEXT:A5G

AIB — The Irish Economic October 2019

21 slides from AIB's investor presentation, October 2019

  1. Slide 1: The Irish Economic Update

    The Irish Economic Update Still good growth, but some soft spots start to emerge October 2019 Oliver Mangan Chief Economist AIB 1

  2. Slide 2: Strong growth by Irish economy in 2013-2018 period

    Strong growth by Irish economy in 2013-2018 period  Irish economy boomed from 1993 to 2007 with GDP up by over 250% – Celtic Tiger  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, hig

  3. Slide 3: Data generally remains solid, but growth is easing

    Data generally remains solid, but growth is easing 65 AIB Irish Mfg and Services PMIs Consumer Confidence (ESRI - KBC) 120 Services 60 100 55 80 Manufacturing 50 60 45 40 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Source: Refinitiv

  4. Slide 4: Most indicators remain strong, but some have softened

    Most indicators remain strong, but some have softened  Continuing good jobs growth – employment rose by 2% yoy in Q2 2019  Unemployment rate falls to near 5% in H1 2019. Live Register decline continues  Further rise in housing completions in H1 2019 – up 17% yoy  Uptrend continues in housing com

  5. Slide 5: Good jobs growth; unemployment rate falls to near 5%

    Good jobs growth; unemployment rate falls to near 5% Year Average 2016 2017 2018 2019(f) 2020(f) 2021(f) Unemployment Rate % 8.4 6.8 5.8 5.2 5.0 4.8 Labour Force Growth % 1.9 1.1 1.8 1.8 1.6 1.8 Employment Growth % 3.7 2.9 2.9 2.5 1.8 2.0 Net Migration : Year to April (‘000) 16.2 19.8 34.0 34.0 35.0

  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 - weakening of euro also helpful France  Exports have risen s

  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 - Some 1,200 multinational companies - Low corporate tax rate of 12.5% - €189bn in Exports - English speaking country - 230,000 Jobs in FDI, 390,000 in total - Well educated, fle

  8. Slide 8: Many top global companies have big operations in Ireland

    Many top global companies have big operations in Ireland 8

  9. Slide 9: Strong performances across domestic economy

    Strong performances across domestic economy Construction Investment  Domestic economy contracted by 20% in period from % 25 (Volume, 3 Qtr Moving Average, YoY% Change) 2008-2012, with particularly big fall in construction  20 Construction sees strong recovery since 2013. Output up nearly 12% on av

  10. Slide 10: 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 17% yoy in H1 2019 - rose by 30,000 CSO Housing Completions 25% to over 18,000 in 2018 25,000  Housing commencements also rose 17% yoy during 20,000 H1 2019 15,000  Planning permissions up 18% in H1 2019, with 12 1

  11. Slide 11: 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 house building 2 10  1 5 Prices up 8

  12. Slide 12: 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

  13. Slide 13: 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 General Gov Gross Debt/GDP Ratio 70 2 60 50 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019(f) 2020(f)

  14. Slide 14: Government finances back in surplus

    Government finances back in surplus  Some €30bn (18% of GDP) of fiscal tightening 2 General Government Balance* (% GDP) implemented in 2008-2014 period 0  Budget deficit has fallen sharply over past -2 decade. Fell to 0.2% of GDP in 2017 -4  A small surplus was recorded in 2018, estimated -6 at 0

  15. Slide 15: Talks underway to avoid a no-deal hard Brexit

    Talks underway to avoid a no-deal hard Brexit  March exit date deferred as UK Parliament was unable to support Withdrawal Agreement  EU granted an extension to Article 50 up to end October  New PM Johnson vowed the UK would leave EU by end October, with or without a deal  Parliament against leav

  16. Slide 16: Brexit expected to lower growth rate of Irish economy

    Brexit expected to lower growth rate of Irish economy  ESRI estimate that Irish output would be reduced over time by 2.6% under a ‘deal’ scenario in the long run (i.e. after 10 years). Unemployment rate is 1% higher  Multiple hits to the Irish economy from a no-deal Brexit: further collapse in ste

  17. Slide 17: Agri. sector would be severely impacted by hard Brexit

    Agri. sector would be severely impacted by hard Brexit Share of Exports by Industry Destined for the UK (ESRI)  Main EU tariffs relate to food products, keeping prices high. 50% UK may also impose tariffs on 45 % all food imports post Brexit 40%  Food and Beverages account 35% 30 % for 25% of tota

  18. Slide 18: AIB Brexit Sentiment Index – Q2 2019

    AIB Brexit Sentiment Index – Q2 2019  A total of 700 SME’s (with up to 250 employees) across the island of Ireland  Headline index remained depressed in Q2. Number of firms reporting that Brexit is having a negative impact on their businesses increased in both ROI and NI  SMEs also remain concern

  19. Slide 19: 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  Construction picking up from still low output levels 2 UK  Public spending on the

  20. Slide 20: AIB Irish Economic Forecasts

    AIB Irish Economic Forecasts % change in real terms unless 2016 2017 2018 2019 (f) 2020 (f) stated GDP 3.7 8.1 8.2 4.0 3.25 GNP 9.9 5.1 6.5 3.7 3.0 Personal Consumption 5.2 3.0 3.4 2.8 2.5 Government Spending 3.6 3.9 4.4 4.0 3.0 Core Fixed Investment* 9.2 4.0 13.0 6.0 6.0 Modified Final Domestic Dem

  21. Slide 21: Risks to the Irish economy

    Risks to the Irish economy  Main risks to Irish recovery no longer internal but external, in particular Brexit  Brexit major issue for Ireland given its strong trading links with UK and sharp fall by sterling  Slowing external environment with growing downside risks to global growth from increasi

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