AIB Group plc · EURONEXT:A5G

AIB — The Irish Economic June 2019

21 slides from AIB's investor presentation, June 2019

  1. Slide 1: The Irish Economic Update

    The Irish Economic Update Good start to 2019, but could be slower growth ahead June 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: Survey indicators suggest growth may slow

    Survey indicators suggest growth may slow 65 AIB Irish Mfg and Services PMIs Consumer Confidence (ESRI - KBC) 120 Services 60 100 55 80 Manufacturing 50 60 45 40 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Source: Thomson Datastream

  4. Slide 4: But real data point to strong start to 2019

    But real data point to strong start to 2019  Continuing very strong jobs growth – employment rose by 3.7% yoy in Q1 2019  Unemployment rate falls to 4.6% in April from 5.5% at end 2018. Live Register continues to decline  Further big rise in housing commencements & completions in Q1 2019– up 32%

  5. Slide 5: Strong jobs growth; unemployment rate down to 4.6%

    Strong jobs growth; unemployment rate down to 4.6% Year Average 2016 2017 2018 2019(f) 2020(f) 2021(f) Unemployment Rate % 8.4 6.8 5.8 4.8 4.4 4.2 Labour Force Growth % 1.9 1.1 1.8 2.5 2.0 1.8 Employment Growth % 3.7 2.9 2.9 3.6 2.4 2.0 Net Migration : Year to April (‘000) 16.2 19.8 34.0 40.0 45.0 5

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

    Large Irish export base performs 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 str

  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  Domestic economy contracted by 20% in period from % Construction Investment (Volume, 3 Qtr Moving Average, YoY% Change) 25 2008-2012, with particularly big fall in construction  Construction sees strong recovery since 2013. Output 20 up by over 15% in e

  10. Slide 10: House building rising steadily, but still at quite low level

    House building rising steadily, but still at quite low level  Housing completions up 23% yoy in Q1 2019 - rose by 35,000 CSO Housing Completions 25% to over 18,000 in 2018 30,000  Housing commencements stay on rising trend: up by 25,000 20,000 32% yoy in Q1 2019 after 29% rise to 22,500 in 2018 

  11. Slide 11: House price inflation slows sharply in past year

    House price inflation slows sharply in past year  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

  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(f) 2019(f) 2020(

  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: 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 percentage point higher  In a ‘disorderly no deal’ scenario, ESRI estimates that GDP would

  16. Slide 16: 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 50% products, keeping prices high. 45 % UK may impose similar tariffs 40% on EU imports post Brexit 35%  Food and Beverages account 30 % for 25% of total I

  17. Slide 17: AIB Brexit Sentiment Index – Q1 2019

    AIB Brexit Sentiment Index – Q1 2019  A total of 700 SME’s (with up to 250 employees) across the island of Ireland  Consistently very negative sentiment readings, with marked fall in Q1 2019 in RoI as firms say Brexit now starting to impact their businesses  SMEs also very concerned about Brexit’

  18. Slide 18: Still much uncertainty about Brexit

    Still much uncertainty about Brexit  Departure date delayed as UK Parliament cannot agree on an exit deal  The Withdrawal Agreement (WA) rejected by UK Parliament on three occasions  UK Parliament has voted by large majority against leaving EU without a deal  Log jam in Parliament, while Europea

  19. Slide 19: Good Irish growth to continue if external risks avoided

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

  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 5.0 7.2 6.7 4.0 3.5 GNP 11.5 4.4 5.9 3.7 3.2 Personal Consumption 4.0 1.6 3.0 2.5 2.5 Government Spending 3.5 3.9 6.4 4.0 3.0 Fixed Investment 51.7 -31.0 9.8 7.0 6.0 Modified Final Domestic Demand*

  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

AIB Group — The Irish Economic June 2019 on 6ix