AIB Group plc · EURONEXT:A5G

AIB — The Irish Economic November 2019

21 slides from AIB's investor presentation, November 2019

  1. Slide 1: The Irish Economic Update

    The Irish Economic Update Still good growth, but noticeable softening in activity indicators November 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 data point to slowing activity

    Survey data point to slowing activity 65 AIB Irish Mfg and Services PMIs Consumer Confidence (ESRI - KBC) 120 Services 60 100 55 80 Manufacturing 50 60 45 40 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Source: Refinitiv Source: Refi

  4. Slide 4: Some real indicators soften, activity surveys weaken

    Some real indicators soften, activity surveys weaken  Still good jobs growth – employment rose by 2% yoy in Q2 2019, but slowest rate since 2013  Downtrend in unemployment rate stalls near 5%. Live Register levelling out in recent months  Further increase in housing completions in H1 2019 – up 17

  5. Slide 5: Jobs growth slowing; downtrend in unemployment stalls

    Jobs growth slowing; downtrend in unemployment stalls 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.

  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 - weaker euro also helpful France  Exports rise strongly, hel

  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: Domestic economy has rebounded strongly

    Domestic economy has rebounded strongly 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 averag

  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 after a 28% increase in 2018 15,000  Planning permissions

  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 70 General Gov Gross Debt/GDP Ratio 2 60 50 0 2011 2012 2013 2014 2015 2016 2017 2018 2019(f) 2020(f) 2021(

  14. Slide 14: Government finances return to surplus in 2018/19

    Government finances return to surplus in 2018/19  Budget deficit has fallen sharply in past decade. General Government Balance* (% GDP) (Based on a Soft Brexit) Declined to 0.2% of GDP in 2017 2  A small surplus was recorded in 2018, estimated 0 -2 at less than 0.1% of GDP  -4 Public finances sli

  15. Slide 15: Further extension to Article 50 as 'Brexit' election looms

    Further extension to Article 50 as ‘Brexit’ election looms  March exit date deferred as UK Parliament was unable to support Withdrawal Agreement  EU granted an extension to Article 50 up to end October  EU and UK agree revised Brexit deal at mid-October Heads of State Summit  Deal does not get t

  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 benign ‘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

  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 – 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 now  M

  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 2017 2018 2019 (f) 2020 (f) 2021 (f) stated GDP 8.1 8.2 5.0 3.25 3.0 GNP 5.1 6.5 3.0 3.0 2.75 Personal Consumption 3.0 3.4 3.0 2.5 2.2 Government Spending 3.9 4.4 4.0 3.0 3.0 Fixed Investment -6.6 -21.1 51.5 6.0 5.0 Core Fixed Investment* 4.

  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 increas

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