Slide 1: The Irish Economic Update
The Irish Economic Update Good growth continues in H1 2019, but some soft spots start to emerge August 2019 Oliver Mangan Chief Economist AIB 1
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
Slide 3: Mainly good data in 2019, but manufacturing slows
Mainly good data in 2019, but manufacturing slows 65 AIB Irish Mfg and Services PMIs Consumer Confidence (ESRI - KBC) 120 Services 60 100 55 80 Manufacturing 50 60 45 40 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Source: ESRI - KBC
Slide 4: Most indicators remain strong, but some have softened
Most indicators remain strong, but some have softened Continuing very strong jobs growth – employment rose by 3.7% yoy in Q1 2019 Unemployment rate falls to 4.5% by mid-year from 5.5% at end 2018. Live Register decline continues Further good rise in housing completions in Q1 2019– up 23% yoy
Slide 5: Strong jobs growth; unemployment rate down to 4.5%
Strong jobs growth; unemployment rate down to 4.5% 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
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
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
Slide 8: Many top global companies have big operations in Ireland
Many top global companies have big operations in Ireland 8
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 nearly 12% on av
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 23% yoy in Q1 2019 - rose by 35,000 CSO Housing Completions 25% to over 18,000 in 2018 30,000 However, marked slowing in new housing 25,000 20,000 registrations and commencements during H1 2019 15,000 Fall back i
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
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
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(
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
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
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 tariffs on EU 40% food imports post Brexit 35% Food and Beverages account 30 % for 25% of total Iris
Slide 17: 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 Slight improvement in headline index in Q2 but number of firms reporting negative impact of Brexit is having on their businesses increased in both ROI and NI SMEs also remain conce
Slide 18: Still much uncertainty about Brexit
Still much uncertainty about Brexit Departure date delayed as UK Parliament could not 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 EU grants extension to Article 50
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
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
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