AIB Group plc · EURONEXT:A5G
AIB — The Irish Economic February 2016
17 slides from AIB's investor presentation, February 2016
Slide 1: The Irish Economic Update – Continuing Very Robust Growth
The Irish Economic Update – Continuing Very Robust Growth February 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: Very strong data across the economy
Very strong data across the economy GDP growth averages 7% year-on-year in first three quarters of 2015 Strong export growth in 2015, averages 13.3% yoy to end Q3 Good Mfg PMI data in 2015 – averages around 55 level during the year Industrial production rose strongly in 2015, including indigenous se
Slide 4: Many indicators point to very robust growth
Many indicators point to very robust growth Irish Growth Rates 10.0 (YoY %, 3 Quarter Moving Avg.) 70 Ireland Mfg and Services PMIs GNP 7.5 65 Services 5.0 60 2.5 GDP 55 Manufacturing 0.0 50 -2.5 45 -5.0 40 -7.5 35 -10.0 30 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2
Slide 5: Labour market improves – strong jobs growth
Labour market improves – strong jobs growth Year Average 2012 2013 2014 2015(f) 2016(f) 2017(f) Unemployment Rate % 14.7 13.1 11.3 9.3 8.0 7.0 Labour Force Growth % -0.6 0.4 -0.3 0.5 1.0 1.4 Employment Growth % -0.6 2.4* 1.7 2.7 2.5 2.5 Net Emigration : Year to April (‘000) 34.4 33.1 21.4 11.6 5.0 0
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 114% of GDP in 2014 Finland UK Major gains in Irish competitiveness since 2009 Germany Exports rise strongly helped by large FDI inflows France Italy and recovery in global e
Slide 7: Impact of FDI on economy (Source IDA)
Impact of FDI on economy (Source IDA) KEY FDI IMPACTS ON THE IRISH ECONOMY - 1,050 multinational companies - €121bn Exports (70% of Irish exports) - 161,000 Jobs in FDI, 275,000 in total - 70% of Corporation Tax - €11bn Spending on services/materials - €8bn in Payroll - 67% of Business R&D expenditu
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) Collapse in construction was big drag on GDP - fell 9.0 6.0 from 13.5% of GDP in 2005-07 to 5.3% by 2012 3.0 Construction has picked up – moderate recovery in 0.0 -3.0 pl
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 11,000 in 2014, up from % 30 Housing Repayment Affordability * 8,300 in 2013. Rose to some 12,500 in 2015 House building still at very low levels. Way below 26 previous peak of near 90,000 completions 22 Demand estimated
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 Gross Gen Gov Debt (% GDP) 140 % Gov Debt Interest (% GDP) 10 120 8 100 80 6 60 4 40 2 20 0 0 2008 2009 2010 2011 2012 2013 2014 2015(f) 2016(f) 2017(f) 2018(f) 1980 1985 1990 1995 2000 2005 2010 2015 Source: Dept of Finance Source: NTMA; Dept of F
Slide 13: Budget deficit falls to very low level
Budget deficit falls to very low level Some €30bn (18% of GDP) of fiscal tightening General Government Balance* (% GDP) 4 implemented in 2008-2014 period 2 Budgetary policy turns mildly expansionary 0 in 2015 and 2016 -2 Budget deficit of 1.5% of GDP in 2015 with a -4 -6 deficit of 0.5% or below lik
Slide 14: Economy has capacity to continue growing strongly
Economy has capacity to continue growing strongly The contraction on the domestic side of economy is % Irish GDP Growth well over and it is now recovering strongly 8 6 Wage growth and very low inflation, owing to 4 collapse in oil prices, boosting real spending power 2 Labour market on steadily impr
Slide 15: AIB Irish Economic Forecasts
AIB Irish Economic Forecasts % change in real terms unless 2012 2013 2014 2015 (f) 2016 (f) 2017 (f) stated GDP 0.2 1.4 5.2 6.5 5.0 4.5 GNP 1.6 4.6 6.9 5.0 4.5 4.0 Personal Consumption -0.8 -0.3 2.0 3.2 3.0 3.0 Government Spending -2.2 1.4 4.6 2.0 2.0 2.0 Fixed Investment 8.6 -6.6 14.3 20.0 9.5 7.0
Slide 16: Brexit would pose big risks for UK and Ireland
Brexit would pose big risks for UK and Ireland Referenda are unpredictable and sentiment can change quickly. Most polls show a small majority in favour of remaining in EU - the lead has narrowed. Referendum poll likely this year May not get much of a free trade agreement between UK & EU post a Brexi
Slide 17: Risks to the Irish economic recovery
Risks to the Irish economic recovery Main risks to Irish recovery no longer internal but external, mainly relating to global growth Recovery in the global economy still quite fragile, with on-going risks and headwinds especially from weakening emerging economies. Ireland vulnerable to any shocks tha