Aib Group Plc · EURONEXT:A5G
Aib — The Irish Economic Update – Very Robust Growth
17 slides from Aib's investor presentation, September 2015
Slide 1: The Irish Economic Update – Very Robust Growth
The Irish Economic Update – Very Robust Growth September 2015 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 unemploym
Slide 3: Very strong data as growth rate hits 7%
Very strong data as growth rate hits 7% GDP grew by 2.1% in Q1 and 1.9% in Q2 2015, up by 7% year-on-year Strong export growth continued in H1 2015, up by 3% in Q1 and 5.4% in Q2, (14% yoy in H1) Impressive Mfg PMI data in 2015 – got close to highest level since 1999 at 56.7 in July Industri
Slide 4: Many indicators pointing to very robust growth
Many indicators pointing to very robust growth Irish Growth Rates Ireland Mfg and Services PMIs (YoY %, 3 Quarter Moving Avg.) 70 10.0 65 7.5 Services GNP 60 5.0 55 2.5 Manufacturing GDP 50 0.0 45 -2.5 40 -5.0 35 -7.5 30 -10.0 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul
Slide 5: Labour market improving – strong jobs growth
Labour market improving – strong jobs growth Year Average 2012 2013 2014 2015(f) 2016(f) 2017(f) Unemployment Rate % 14.7 13.1 11.3 9.5 8.3 7.3 Labour Force Growth % -0.6 0.4 -0.3 0.6 1.2 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
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 Major gains in Irish competitiveness since 2009 UK Germany Euro weakness gives additional boost to Irish exports. France Italy Up by over 20
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 9.0 Core Domestic Spending* (% Yr-on-Yr) Collapse in construction was big drag on GDP - fell 6.0 3.0 from 13.5% of GDP in 2005-07 to 5.3% by 2012 0.0 Construction has turned around – moderate recovery -3.0 in pl
Slide 9: House price inflation eases on CB mortgage rules
House price inflation eases on CB mortgage rules 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 1 10 House prices declined sharply – fell by over 50% 0 0 between their peak in late 2007
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. Should rise to 13-14,000 in 2015 26 House building still at very low levels. Way below 22 previous peak of near 90,000 completions Demand
Slide 11: AIB Model of Potential Housing Demand
AIB Model of Potential Housing Demand Calendar Year 2010 2011 2012 2013 2014 2015 2016 Household 22,000 17,000 14,000 15,000 16,500 18,000 19,000 Formation of which Indigenous 26,000 23,000 20,500 19,000 18,000 17,500 17,000 Population Growth Migration Flows -7,000 -9,000 -9,500 -7,000 -4,500 -3,000
Slide 12: Austerity ends. Low budget deficit likely in 2015
Austerity ends. Low budget deficit likely in 2015 Some €30bn (18% of GDP) of fiscal tightening General Government Balance* (% GDP) implemented in 2008-2014 period. 4 Neutral 2015 budget aimed for sub 3% deficit. 2 Included modest tax cuts. Austerity at an end. 0 -2 Primary budget (i.e. excludi
Slide 13: Gov debt ratio falling, private sector deleveraging
Gov debt ratio falling, private sector deleveraging Gross Gen Gov Debt (% GDP) % Debt Interest (% GDP) 140 10 120 8 100 80 6 60 4 40 2 20 0 0 2008 2009 2010 2011 2012 2013 2014(f) 2015(f) 2016(f) 2017(f) 2018(f) 1980 1985 1990 1995 2000 2005 2010 2015 Source: Dept of Finance Source: NTMA; Dept of Fi
Slide 14: Key factors driving the strong recovery
Key factors driving the strong recovery Good pick-up in demand in key export markets, including the Eurozone Big influx of new FDI creating even larger export base at over 110% of GDP Large competitiveness gains made in past six years as wages and prices fell Sharp decline of the euro given
Slide 15: Economy can continue to grow strongly
Economy can continue to grow strongly The contraction on the domestic side of economy is % 8 Irish GDP Growth well over and the sector is now expanding strongly 6 Labour market on steadily improving path 4 Construction picking up from very depressed levels 2 Fiscal tightening at an end, with
Slide 16: 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 6.0 5.0 4.5 GNP 1.6 4.6 6.9 5.5 4.5 4.0 Personal Consumption -0.8 -0.3 2.0 3.0 3.0 3.0 Government Spending -2.2 1.4 4.6 2.5 2.0 2.0 Fixed Investment 8.6 -6.6 14.3 14.5 7.0 7.0
Slide 17: Risks to the Irish economic recovery
Risks to the Irish economic recovery Recovery in the global economy still quite moderate, especially in the Eurozone, with on-going risks and headwinds. Ireland vulnerable to any shocks which would hit its exports Risk of a Brexit. Would certainly be an issue for Ireland given its strong trading
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