AIB Group plc · EURONEXT:A5G
AIB — Corporate Update (April 2016)
18 slides from AIB's corporate update, April 2016
Slide 1: The Irish Economic Update
The Irish Economic Update Continuing Robust Growth But Risks Remain April 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 very strong data in early 2016
Continuing very strong data in early 2016 GDP growth of 7.8% and GNP growth of 5.7% in 2015 Very strong export growth in 2015 of 13.8% BoP surplus of 4.4% of GDP in 2015, up from 3.6% in 2014 Industrial production rose strongly in 2015, including from indigenous sectors Continuing solid Manufacturin
Slide 4: Many indicators show very robust growth
Many indicators show very robust growth 70 Ireland Mfg and Services PMIs 65 Services 60 55 Manufacturing 50 45 40 35 30 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Source: Thomson Datastream, Investec 4
Slide 5: Labour market improves – strong jobs growth
Labour market improves – strong jobs growth Year Average 2012 2013 2014 2015 2016(f) 2017(f) Unemployment Rate % 14.7 13.1 11.3 9.5 8.3 7.5 Labour Force Growth % -0.6 0.4 -0.3 0.5 1.0 1.4 Employment Growth % -0.6 2.4* 1.7 2.6 2.3 2.2 Net Emigration : Year to April (‘000) 34.4 33.1 21.4 11.6 5.0 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 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 - 1,050 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) 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 % National House Price Inflation % 3 30 of cycle Bulk of the new housing stock overhang eliminated 2 20 House prices declined sharply – fell by over 50% 1 10 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 % Housing Repayment Affordability * 30 11,000 in 2014 and 8,300 in 2013 House building still at very low levels. Way below 26 previous peak of near 90,000 completions 22 Annual demand estimated at
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 -4 -6 Deficit of around 0.5% likely in 20
Slide 14: Economy can continue to grow strongly
Economy can continue to grow 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 improving path 0
Slide 15: AIB Irish Economic Forecasts
AIB Irish Economic Forecasts % change in real terms unless 2012 2013 2014 2015 2016 (f) 2017 (f) stated GDP 0.2 1.4 5.2 7.8 5.0 4.5 GNP 1.6 4.6 6.9 5.7 4.5 4.0 Personal Consumption -0.8 -0.3 2.0 3.5 3.5 3.0 Government Spending -2.2 1.4 4.6 -0.8 1.0 2.0 Fixed Investment 8.6 -6.6 14.3 28.2 10.0 7.5 Co
Slide 16: Brexit would pose big risks for UK economy
Brexit would pose big risks for UK economy Referendum on Brexit in UK on June 23rd. Opinion polls point to a close result. 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 used in further producti
Slide 17: Brexit would be a major headache for Ireland
Brexit would be a major headache for Ireland Brexit would have 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 Hence, negative Brexit impact on UK growth would have knock-on effects for activity here Imp
Slide 18: 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