Aib Group Plc · EURONEXT:A5G

Aib — The Irish Economic Update – Continuing Strong Growth

16 slides from Aib's investor presentation, August 2015

  1. Slide 1: The Irish Economic Update – Continuing Strong Growth

    The Irish Economic Update – Continuing Strong Growth August 2015 Oliver Mangan Chief Economist April 2013 AIB aibeconomicresearch.com 1

  2. Slide 2: Irish recovery gains strong momentum

    Irish recovery gains 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.

  3. Slide 3: Data remain very upbeat in 2015

    Data remain very upbeat in 2015  GDP grew by 1.4% in Q1 2015, up by 6.5% year-on-year  Strong export growth continued in Q1 2015, up by 2.3% in the quarter  Impressive Mfg PMI data in 2015 – near highest level since 1999, at 56.7 in July  Industrial production rising strongly. OECD leading indic

  4. Slide 4: Very robust economic indicators

    Very robust economic indicators Irish Growth Rates (YoY %, 3 Quarter Moving Avg.) 70 Ireland Mfg and Services PMIs 10.0 7.5 65 Services GNP 5.0 60 2.5 55 GDP 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 2015 Jul-05 J

  5. 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 0.3 1.0 1.2 Employment Growth % -0.6 2.4* 1.7 2.3 2.3 2.3 Net Emigration : Year to April (‘000) 34.4 33.1 21.4 15.0 10.0

  6. 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  Goods exports rebounded in 2014 after 4% fall in France 2013 on sharp drop in pha

  7. 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

  8. Slide 8: Domestic economy rebounding

    Domestic economy rebounding  Domestic economy contracted by 15% from 2008-13 20 % Construction Investment (3 Qtr MA, % YoY)  Collapse in construction was big drag on GDP - fell 10 from 13.5% of GDP in 2005-07 to 5.3% by 2012 0  Construction has turned around – grew by circa 10% -10 in 2013 and 20

  9. Slide 9: House prices rise amidst a lack of supply

    House prices rise amidst a lack of supply  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

  10. 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

  11. 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

  12. 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

  13. 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

  14. Slide 14: Economy has the capacity to grow strongly

    Economy has the capacity to grow strongly  The contraction on the domestic side of economy is % Irish GDP Growth well over and the sector is now expanding strongly 8  Labour market on steadily improving path 6 4  Construction picking up from very depressed levels 2  Fiscal tightening at an end,

  15. 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 5.0 4.5 4.0 GNP 1.6 4.6 6.9 4.5 4.0 3.5 Personal Consumption -0.8 -0.3 2.0 4.0 3.0 3.0 Government Spending -2.2 1.4 4.6 3.0 1.5 2.0 Fixed Investment 8.6 -6.6 14.3 2.5 7.0 7.0 D

  16. Slide 16: 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 or Grexit. Would hit financial markets and have economic effects

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