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AIB — Corporate Update (February 2021)

16 slides from AIB's corporate update, February 2021

  1. Slide 1: The Irish Economic Update

    The Irish Economic Update: Tough start to 2021, but prospects brighten as vaccine roll out begins February 2021 Oliver Mangan Chief Economist AIB 1

  2. Slide 2: Now in third lockdown, but outlook brightens on vaccines

    Now in third lockdown, but outlook brightens on vaccines  Second lockdown imposed from late Oct to end November as Covid cases spiked higher  Domestic economy may have contracted again in Q4 given lockdowns re-imposed for a period  However, core retails sales up 4% yoy in Q4’20, well above pre-Co

  3. Slide 3: Strong Q3 rebound after big Covid hit to economy in H1'20

    Strong Q3 rebound after big Covid hit to economy in H1’20 Construction Output % (Volume, YoY% Change)  Modified final domestic demand up by 18.7% in Q3, 30 20 after declines of 1.6% & 15.5% in Q1 and Q2 2020 10  Overall, modified domestic demand was down by 0 -10 6.4% yoy over Q1-Q3 2020 period -2

  4. Slide 4: Q3 spending recovery continued in Q4, despite lockdown

    Q3 spending recovery continued in Q4, despite lockdown % Modified* Final Domestic Demand Employment (YoY, %) % (% Yr-on-Yr) 8 10 6 5 Private 4 0 2 -5 Total Public 0 -10 -2 -15 -4 -20 Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2019 Q3 2020 -6 Source: CSO (*Excludes imports of I.P. & Aircraft

  5. Slide 5: Second lockdown sees activity dip somewhat in Q4

    Second lockdown sees activity dip somewhat in Q4 AIB Irish Mfg and Services PMIs Ulster Bank Construction PMI 80 80 Services 70 70 60 60 50 50 40 Manufacturing 40 30 30 20 20 10 10 0 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Source: Refinitiv S

  6. Slide 6: Goods exports up strongly in 2020, but services exports fell

    Goods exports up strongly in 2020, but services exports fell  Ireland a very open economy – exports, driven Exports as % of GDP by large scale FDI, are a huge part of economy Finland  UK Exports rise strongly in recent years, helped by Germany large FDI inflows France  Total exports rose by 10.4%

  7. Slide 7: New house building activity held up in 2020

    New house building activity held up in 2020  Housing completions rose 18% to 21,240 units in 2019 Irish Housing Activity  Completions down by 32% yoy in Q2 on lockdown, but 40,000 35,000 recover strongly in Q3 – down 9% yoy in Q1-Q3 period 30,000  House commencements up 17% in 2019 to 26,000 unit

  8. Slide 8: House prices starting to move higher again

    House prices starting to move higher again  House prices declined by very sharp 55% over 2007-13 % 6 National House Price Inflation % 24  Prices have since recovered strongly; 85% above trough 5 4 20 16 by October 2020, but still some 17% below 2007 peak 3 12  House price inflation slowed sharply

  9. Slide 9: AIB Model of Estimated Housing Demand

    AIB Model of Estimated Housing Demand  Rising headship rates added circa Calendar Year 2017 2018 2019 2020 2021 8,000 per year to housing demand in 2002-2011 period Household 28,000 32,000 31,000 25,000 25,000  Shortage of housing, high rents, Formation tighter lending rules saw average of which h

  10. Slide 10: Private sector deleverages, Govt. debt ratios rising again

    Private sector deleverages, Govt. debt ratios rising again Irish Household Debt Ratio Irish Private Sector Credit (Inc Securitisations) as % GNI* % (% of Disposible Income) % 220 350 200 300 250 180 200 160 150 140 100 120 50 100 0 Q2 2002 Q2 2004 Q2 2006 Q2 2008 Q2 2010 Q2 2012 Q2 2014 Q2 2016 Q2 2

  11. Slide 11: Large budget deficit in 2020 and again in 2021

    Large budget deficit in 2020 and again in 2021  Budget deficit declined sharply over last decade, 2 General Government Balance* (% GDP) with small surpluses recorded in 2018 and 2019 0  Primary budget surplus (i.e. excluding debt -2 interest) of 1.8% of GDP in 2019 -4  However, Covid-19 and effor

  12. Slide 12: Main points about the EU-UK Free Trade Agreement

    Main points about the EU-UK Free Trade Agreement  EU and UK finally agreed on a trade deal just before Christmas, thereby allow for continuing tariff-free and quota-free trade in goods  However, the FTA is much inferior to the EU Single Market, involves a lot of extra admin costs and likely delays

  13. Slide 13: Economy was in very strong shape ahead of Covid shock

    Economy was in very strong shape ahead of Covid shock  Economy was in very strong shape ahead of being hit by very deep 2020 Covid recession  Well balanced, robust underlying growth of circa 5% per annum over 2013-19 period  Large inflows of FDI and strong export growth remain key features of the

  14. Slide 14: Key medium-term Irish growth drivers remain in place

    Key medium-term Irish growth drivers remain in place  Favourable medium-term drivers of strong Irish growth remain in place OECD GDP Forecasts (Dec 2020)  House building picking up from still low output % Vol 2020 2021 2022 levels – big focus of government policy World -4.2 4.2 3.7  Government sp

  15. Slide 15: AIB Irish Economic Forecasts

    AIB Irish Economic Forecasts % change in real terms unless 2018 2019 2020 (f) 2021 (f) 2022 (f) stated GDP 8.5 5.6 3.0 4.0 5.0 GNP 7.3 3.4 -0.5 3.5 4.5 Personal Consumption 2.8 3.2 -9.0 4.0 5.0 Government Spending 5.8 6.3 8.7 0.0 -2.5 Fixed Investment* -6.2 74.8 -16.5 -2.0 7.0 Exports 11.1 10.5 4.0

  16. Slide 16: Risks to the Irish economy

    Risks to the Irish economy  Main near term risk is still Covid-19 – continues to weigh heavily on growth & employment  Persistence of virus could see scarring effects – high business failures, rising bad debts, job losses  Very open nature of Irish economy means it is exposed to weakening global

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