AIB Group plc · EURONEXT:A5G
AIB — the irish economic july 2016
18 slides from AIB's investor presentation, July 2016
Slide 1: The Irish Economic Update
The Irish Economic Update Brexit Poses Challenge to Strong Recovery July 2016 Oliver Mangan Chief Economist April 2013 AIB aibeconomicresearch.com 1
Slide 2: Irish recovery gains very strong momentum
Irish recovery gains very strong momentum 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% and GNP down 10% Collapse in construction activity and banking system, severe fiscal tightening, high unemployment. I
Slide 3: Continuing upbeat data in H1 2016
Continuing upbeat data in H1 2016 GDP growth of 7.8% and GNP growth of 5.7% in 2015 BoP surplus of 4.4% of GDP in 2015, up from 3.6% in 2014 Strong export growth has continued in early months of 2016, after rise of 13.8% in 2015 Continuing good manufacturing PMI data – averages 52.4 in H2 2016 Very
Slide 4: Many indicators point to very robust growth
Many indicators point to very robust growth Industrial Production % (Excluding Modern High-Tech Sector) 15 10 5 0 -5 -10 -15 -20 Apr-06 Apr-08 Apr-10 Apr-12 Apr-14 Apr-16 Year-on-Year, 3mth mov avg (%) Source: CSO via Thomson Datastream 4
Slide 5: Strong jobs growth & falling unemployment
Strong jobs growth & falling unemployment Year Average 2013 2014 2015 2016(f) 2017(f) 2018(f) Unemployment Rate % 13.1 11.3 9.5 7.9 7.2 6.7 Labour Force Growth % 0.4 -0.3 0.5 0.4 0.9 1.0 Employment Growth % 2.4* 1.7 2.6 2.1 1.7 1.5 Net Emigration : Year to April (‘000) 33.1 21.4 11.6 6.0 3.0 0.0 * E
Slide 6: Impressive performance by exports
Impressive performance by exports Ireland a very open economy – exports, driven by Exports as % of GDP 2014 huge FDI, equated 121.5% of GDP in 2015 Finland UK Major gains in Irish competitiveness since 2009 Germany Exports rise strongly helped by large FDI inflows France Italy and recovery in global
Slide 7: Impact of FDI on economy (Source IDA)
Impact of FDI on economy (Source IDA) KEY FDI IMPACTS ON THE IRISH ECONOMY - 1,200 multinational companies - €125bn Exports (70% of Irish exports) - 175,000 Jobs in FDI, 290,000 in total - 70% of Corporation Tax - €13.5bn Spending on services/materials - €8.5bn in Payroll - 67% of Business R&D expen
Slide 8: Strong rebound by domestic economy
Strong rebound by domestic economy Domestic economy contracted by 20% from 2008-12 Core Domestic Spending* (3 Qtr MA, % Yr-on-Yr) 9.0 Collapse in construction was big drag on GDP - fell 6.0 from 13.5% of GDP in 2005-07 to 5.3% by 2012 3.0 Construction has seen modest pick up since then – 0.0 -3.0 ou
Slide 9: House prices rise as shortages emerge in market
House prices rise as shortages emerge in market Housing output fell by 90% but now past the bottom % 3 National House Price Inflation % 30 of cycle 2 20 Bulk of the new housing stock overhang eliminated 1 10 House prices declined sharply – fell by over 50% 0 0 between their peak in late 2007 and ear
Slide 10: House building rising slowly from very depressed levels
House building rising slowly from very depressed levels Housing completions at 12,700 in 2015, up from 11,000 in 2014 and 8,300 in 2013 House building still at very low levels. Way below previous peak of near 90,000 completions Annual demand estimated at over 25,000 new units Trend in new housing re
Slide 11: AIB Model of Estimated Potential Housing Demand
AIB Model of Estimated Potential Housing Demand Calendar Year 2012 2013 2014 2015 2016 2017 2018 Household 14,000 15,000 16,500 19,500 21,500 22,000 23,000 Formation of which Indigenous 20,000 17,500 17,000 17,500 17,000 16,000 15,500 Population Growth Migration Flows -9,000 -5,500 -3,500 -1,500 1,0
Slide 12: Gov debt ratio falling, private sector deleveraging
Gov debt ratio falling, private sector deleveraging % 10 Gov Debt Interest (% GDP) 8 6 4 2 0 1980 1985 1990 1995 2000 2005 2010 2015 2020 Source: NTMA; Dept of Finance % Irish Private Sector Credit (Inc Securitisations) as % GDP Household Debt Ratio (%) 225 250 225 200 Debt as % of Disposable Income
Slide 13: Budget deficit falls to very low level
Budget deficit falls to very low level Some €30bn (18% of GDP) of fiscal tightening implemented in 2008-2014 period Budgetary policy turns mildly expansionary in 2015 and 2016 Budget deficit falls sharply in recent years Deficit of under 1% of GDP likely in 2016 Balanced budget possible in 2017 or 2
Slide 14: Brexit vote to impact growth but should remain strong
Brexit vote to impact growth but should remain strong The contraction on the domestic side of economy is % 8 Irish GDP Growth well over and it is now recovering strongly 6 Wage growth and very low inflation boosting real 4 spending power 2 Labour market on steadily improving path 0 -2 Construction s
Slide 15: AIB Irish Economic Forecasts – Post Brexit Vote
AIB Irish Economic Forecasts – Post Brexit Vote % change in real terms unless 2013 2014 2015 2016 (f) 2017 (f) 2018 (f) stated GDP 1.4 5.2 7.8 4.7 3.5 3.0 GNP 4.6 6.9 5.7 4.2 3.0 2.5 Personal Consumption -0.3 2.0 3.5 3.3 2.5 2.5 Government Spending 1.4 4.6 -0.8 1.0 1.5 1.5 Fixed Investment -6.6 14.3
Slide 16: Brexit poses big risks for UK economy
Brexit poses big risks for UK economy UK votes to leave EU in Referendum on June 23rd. Uncertainty prevails over the exit Very close links between the UK and rest of EU, which takes 44% of UK exports Over 50% of UK imports come from EU, about half of which are intermediates goods UK runs a large tra
Slide 17: Brexit is a major headache for Ireland
Brexit is a major headache for Ireland Brexit has serious implications for Ireland given close economic/trade links with UK Trade with UK equates to 35% of Irish GDP. Thus, a key trading partner Negative Brexit impact on UK growth will have knock-on effects for activity here Key for Ireland is the t
Slide 18: Risks to the Irish economic recovery
Risks to the Irish economic recovery 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 Recovery in the global economy still quite fragile, with on-going risks and headwinds especially from weakenin