AIB Group plc · EURONEXT:A5G
AIB — The Irish Economic December 2021
17 slides from AIB's investor presentation, December 2021
Slide 1: The Irish Economic Update
The Irish Economic Update: Very strong rebound in activity, but risks remain amid heightened uncertainty December 2021 Oliver Mangan Chief Economist AIB 1
Slide 2: Economy rebounds strongly post Q1 lockdown
Economy rebounds strongly post Q1 lockdown Construction Output % (Volume, YoY% Change) GDP grew by 5.9% in 2020, with GNP up 3.4% 40 30 Modified final domestic demand fell by 4.9% and 20 modified gross national income down 3.5% in 2020 10 Third lockdown saw GNP contract by 3% in Q1 2021 0 -10
Slide 3: Robust recovery evident across the economy
Robust recovery evident across the economy Indicators show very strong rebound in activity from Q2 onwards after third lockdown ended Mfg PMI hit record high of 64.1 in May, and has stayed above 60 since then. At 62.1 in Oct Services PMI jumped to twenty year high of 66.6 in July, at 63.7 in S
Slide 4: Indicators pick up strongly as economy reopens
Indicators pick up strongly as economy reopens AIB Irish Mfg and Services PMIs Ulster Bank Construction PMI 70 70 60 60 50 50 Manufacturing 40 40 30 30 Services 20 20 10 10 Oct-16 Oct-17 Oct-18 Oct-19 Oct-20 Oct-21 0 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19 Oct-20 Oct-21 Source: Markit via Refinitiv Sourc
Slide 5: Unemployment declining rapidly, inflation rising sharply
Unemployment declining rapidly, inflation rising sharply % Employment (YoY, %) 12 Unemployment Rate 32 Private 9 28 Covid-19 Adjusted Rate 6 24 20 3 Total 16 0 Public 12 -3 Traditional Rate 8 -6 4 -9 Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2019 Q3 2020 Q3 2021 0 Source: CSO via Refinitiv Nov-16 Nov-17 No
Slide 6: Exports perform impressively throughout the pandemic
Exports perform impressively throughout the pandemic 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 Pharma, medical care products, IT e
Slide 7: House building holds up, commencements surge in 2021
House building holds up, commencements surge in 2021 Total completions amounted to 20,535 in 2020, just Irish Housing Activity 2.6% down on 2019 level despite a 6-week lockdown 40,000 35,000 Big jump in planning permissions in past couple of years 30,000 25,000 Commencements fell by over 17% t
Slide 8: House prices on sharp upward trend
House prices on sharp upward trend % National House Price Inflation % House prices declined sharply, by 55% over 2007-13 2.5 15.0 2.0 12.0 Prices have recovered strongly; 7.5% below 2007 peak 1.5 9.0 CSO data show house prices little changed over 2019- 1.0 0.5 6.0 3.0 20, until starting to mov
Slide 9: AIB Model of Estimated Housing Demand
AIB Model of Estimated Housing Demand Rising headship rates added circa Calendar Year 2019 2020 2021 2022 2023 8,000 per year to housing demand in 2002-2011 period Household 31,000 22,500 20,500 23,000 24,000 Shortage of housing, high rents, Formation tighter lending rules saw average of which h
Slide 10: Private sector deleverages, Gov. debt ratios to resume downtrend
Private sector deleverages, Gov. debt ratios to resume downtrend Irish Household Debt Ratio Irish Private Sector Credit (Inc Securitisations) as % GNI* % (% of Disposible Income) % 220 350 200 300 180 250 160 200 140 150 120 100 100 50 80 0 Q2 2003 Q2 2005 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2
Slide 11: Budget deficit in sharp decline as economy rebounds
Budget deficit in sharp decline as economy rebounds Budget deficit fell sharply during last decade, 2 General Government Balance (% GDP) with small surpluses recorded in 2018 and 2019 General Gov budget deficit of €18.4bn in 2020, or 0 -2 5% of GDP, as Covid-19 hit public finances Strong rebou
Slide 12: Strong economic growth likely, though risks remain
Strong economic growth likely, though risks remain Key ingredients in place for continued strong growth IMF Global GDP Forecasts (Oct 2021) by Irish economy, following sharp rebound this year % Vol 2021 2022 2023 Very high Irish vaccination rates against Covid World 5.9 4.9 3.7 World economy r
Slide 13: AIB Irish Economic Forecasts
AIB Irish Economic Forecasts % change in real terms unless 2019 2020 2021 (f) 2022 (f) 2023 (f) stated GDP 4.9 5.9 14.0 6.0 4.0 GNP 5.0 3.4 8.0 5.0 3.5 Modified Final Domestic Demand 1.7 -4.9 5.5 6.3 3.8 Personal Consumption 3.3 -10.4 6.5 8.5 4.0 Government Spending 7.1 10.9 2.5 -1.5 1.5 Fixed Inves
Slide 14: Brexit: The EU-UK Trade & Cooperation Agreement
Brexit: The EU-UK Trade & Cooperation Agreement The Trade Deal: EU and UK finally agreed on a trade deal before end 2020, 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 dela
Slide 15: Residual Brexit Issue Remains over NI Protocol
Residual Brexit Issue Remains over NI Protocol UK does not rule out triggering Article 16 in dispute with EU over operation of NI Protocol EU has offered concessions on Protocol. Discussions with UK continuing, which is a positive sign Triggering Article 16 would effectively suspend operation
Slide 16: Changes to Corporate Tax Regime Agreed
Changes to Corporate Tax Regime Agreed Importance of FDI: Some 1,600 multinational companies are based in Ireland, accounting for over 250,000 in direct employment Corporation tax receipts of €12bn in 2020 or circa 20% of total tax revenue - 80% comes from MNCs Changes to Corporate Tax Regime Agre
Slide 17: Risks remain for the Irish economy
Risks remain for the Irish economy Main risk is still Covid-19 – high case numbers, concerns about new variants, restrictions Virus could still have scarring effects – rise in business failures & bad debts, job losses Very open Irish economy so vulnerable to global slowdown, trade disruptions