Aib Group Plc · EURONEXT:A5G

Aib — The Irish Economic Update Robust Growth But Risks Remain

20 slides from Aib's investor presentation, March 2016

  1. Slide 1: The Irish Economic Update: Robust Growth But Risks Remain

    The Irish Economic Update Robust Growth But Risks Remain March 2016 Oliver Mangan Chief Economist April 2013 AIB aibeconomicresearch.com 1

  2. Slide 2: Continuing concerns about global economy

    Continuing concerns about global economy GDP (Vol % Change) 2013 2014 2015(e) 2016(f) 2017(f) World 3.2 3.3 3.0 3.0 3.3 Advanced Economies 1.2 1.8 1.9 1.8 1.9 US 2.2 2.4 2.4 2.0 2.2 Euro Area -0.4 0.9 1.5 1.4 1.7 UK 1.7 2.9 2.2 2.1 2.0 Japan 1.6 0.0 0.6 0.8 0.6 Source: OECD Economic Outlook, Februar

  3. Slide 3: Global interest rates to remain very low for years

    Global interest rates to remain very low for years Official Interest Rate in the Eurozone, US and UK % 3 Month Euribor Futures 7 0.1 6 UK 0.0 5 -0.1 4 -0.2 3 US Eurozone 2 -0.3 Source : Thomson Datastream 1 -0.4 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 0 Latest : 26-Feb-2016 As of: 01

  4. Slide 4: 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

  5. Slide 5: Very strong Irish data continue in early 2016

    Very strong Irish data continue in early 2016 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 Industrial production rose strongly in 2015, including indigenous sectors Solid Mfg PMI data – averages 53.6 in Jan/Feb 2016 Ve

  6. Slide 6: 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 30 -10.0 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16

  7. Slide 7: 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

  8. Slide 8: 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

  9. Slide 9: Impact of FDI on economy

    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

  10. Slide 10: 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

  11. Slide 11: 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

  12. Slide 12: 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

  13. Slide 13: 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

  14. Slide 14: 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

  15. Slide 15: 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 0.5% or below likely in

  16. Slide 16: 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

  17. Slide 17: 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

  18. Slide 18: 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

  19. Slide 19: 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

  20. Slide 20: 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

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