for April, beginning to re-open in May Irelands economy and - PowerPoint PPT Presentation

Ireland: Shutdown for April, beginning to re-open in May Ireland’s economy and financial system was in its best shape for almost two decades pre-Covid 19 May 2020

Index Page 3: Summary Page 8: Macro Page 16: Covid-19 fiscal response Page 24: Fiscal & NTMA funding Page 39: Long-term fundamentals Page 48: Property Page 54: Brexit Page 61: Other Data 2

Summary Ireland hit hard like rest of Europe but better placed than most to weather Covid- 19 recession

Economy grew strongly before Covid-19; unemployment shows large impact like other countries Irish wage bill less impacted – Robust growth in run up to True unemployment rate lockdown and timing of peak uncertain ICT and Pharma help 30 Latvia 30% 28.2 Lithuania France 25% 25 Spain Netherlands 20% UK Malta 20 Cyprus 15% Sweden Portugal 16.0 10% 15 Luxembourg Denmark Austria 5% EA 19 10 Finland 0% EU 27 Slovenia -5% 5 Belgium Greece 40% of wage Italy bill in most -10% 5.4 Ireland affected 0 Slovakia sectors -15% 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Germany 1996 1999 2002 2005 2008 2011 2014 2017 30 35 40 45 50 Unemployment Compensation of Employee in most GDP Underlying* Covid-19 Adjusted Unemployment affected sectors (% of total) Source: CSO * Underlying series is modified final domestic demand (excludes inventories) ** The dotted line is CSO data. It can be considered an upper bound for unemployment in April. 4 There are definitional questions around whether those on government income supports are unemployed. Some will have left the labour force, others are just temporarily furloughed.

Ireland used 2014-19 growth to create fiscal room and improve debt sustainability; will be needed in years ahead Six years of primary Improved debt position allows Debt fell to 99% of national surplus; run to end in 2020 for fiscal policy to act income but will reverse 10 180% € bns Debt-to-GNI* 160% 5 (99% 2019f, from 166% peak) 140% 0 120% -5 Debt-to-GG Revenue 100% (233% 2019, from 353%) 80% -10 60% -15 Average interest rate 40% -20 (2.2% 2019, from 5.1%) 20% -25 0% 1995 1998 2001 2004 2007 2010 2013 2016 2019e 1995 1998 2001 2004 2007 2010 2013 2016 2019 Debt-to-GDP^ (59% 2019, from 120%) GG Balance Primary Balance Debt to GNI* Debt to GDP ^ due to GDP distortions, Debt to GDP is not representative for Ireland, we suggest using other 5 measures listed.

Covid-19 and Ireland outlook Recession Exposure Policy Ireland’s domestic economy Irish rish fisc iscal res esponse se cu curr rrently ly Irela eland is is he headed for or rece ecess ssion. has be has been hi hit t har hard li like oth others s at t 6.5% .5% of of GNI* NI*, mor ore cou ould Key que questi tion is is for or ho how lon long? but the but there ar are rela elati tive pos positi tives. s. fol ollow if if nee needed. This his is is a a bl black ck swan event. The he Our ur in internati tionally y tr traded ECB CB an and Fed acti actions s sho hould cap ap fan an cha chart t of of out outcomes s is is wid ide sec ectors s (Pharm rma and and ICT) ) wil ill in interest t cos osts ts an and al allow so o for orecasti ting is is of of li littl tle val alue. help help weath ther r the the stor orm nec necess ssary ry fis iscal roo oom 6

NTMA already funded € 11bn of revised funding plan of € 20-24bn for 2020; Ireland relatively well placed Fle lexibility 10 years AA- AA Irela eland has has la large cash ash bal balances, s, One ne of of the the lon longest t weig eighted Irela eland has has be been up upgraded to o the the la last t 2020 rede edempti tion average maturi riti ties s in in Eur Europe AA space by y S& S&P prefu pr funded an and a a yea ear r free of of maturi ring bo bonds s in in 2021 The he NTM NTMA us used ECB CB QE QE to o On n rela elati tive ba basi sis, s, hi hit t to o Irela eland extend deb debt t maturi rities red educe may be be le less tha than ot other r Funding can an com ome from several l in interest t cos ost t and and rep epay y the the IMF. cou ountri tries s gi given mul ulti tinati tionals, s, sou ources. s. Bo Bonds, s, Sh Short rt Term erm Now the No the ECB CB has has start arted to o rela elati tively smaller dom domesti tic paper an pa and the the Rai ainy Day Fun und. buy ag buy again wit ithout t li limits ts sha hare of of ec economy an and touri ourism sm sec ector r Irela eland has has la large cash ash bal balances, s, 2020 red edempti tions s pr prefu funded, min inimal red edempti tions s in in 2021 7

Section 1: Macro Q2 numbers will be grim but structure of Ireland’s economy will help cushion impact

Labour market illustrated Ireland’s march to recovery and full employment; now highlights the stark Covid-19 impact April unemployment rate: Traditional CSO A million getting income supports - unclear how many would be considered unemployed metric 5.4%; incl. Covid-19 impact 28.2%* 30 2.4 Millions 28.2 CSO has urged caution on 2.3 Covid-19 data given likelihood 25 of revisions 2.2 20 2.1 16.0 2.0 15 1.9 10 1.8 Note: CSO define 5 1.7 those on wage subsidy scheme as 5.4 1.6 0 employed 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2019 2020 1.5 1998 1999 2000 2001 2003 2004 2005 2006 2008 2009 2010 2011 2013 2014 2015 2016 2018 2019 Unemployment Total Employment Covid-19 Adjusted Unemployment Source: CSO, Department of Social Protection, NTMA calculations * The dotted line is CSO data. It can be considered an upper bound for unemployment in April. Note: There is no official data on how employment has been affected yet. The next labour market 9 survey may answer questions about what constitutes being employed and whether those losing jobs will leave the labour market. Thus we give a range of outcomes, as we cannot be accurate now.

PMIs have tumbled like other countries but Ireland’s contraction smaller at the margin Ireland’s Composite PMI at 17.3 in April, Brief upswing after Brexit reprieve but PMIs Manufacturing held up at 36.0 have fallen sharply on Covid-19 since 60 70 50 60 40 50 30 40 Manu 36.0 20 30 10 20 Comp 17.3 0 Services 10 13.9 0 January Composite PMI March April Services Manufacturing Composite 10 Source: Bloomberg

During lockdown, Pharma and ICT will stabilise GVA; domestic sectors in lockdown or have reduced capacity Domestic Estimated 2019 data MNCs GVA Wage Bill^ Owned % of normal ( € Billions) Profits^^ Profits^^ Output* 3.1 0.7 2.4 0.0 >75% Agri, Forest & Fish 112.4 14.1 7.9 90.3 >75% Industry (incl. Pharma) 9.7 4.5 5.0 0.2 <25% Construction 36.2 19.8 10.0 6.0 <25% Dist, Transport, Hotels & Rest. 44.7 8.3 1.9 34.7 >75% ICT 23.3 9.2 5.1 9.3 >75% Financial & Insurance 20.9 0.7 20.1 0.0 <50% Real Estate 33.7 12.8 5.6 15.6 >75% Prof, Admin & Support 33.7 28.3 5.5 0.1 >75% P Admin, Educ. & Health 4.4 2.1 2.1 0.1 <25% Arts, Other 324.2 100.6 65.4 156.3 - All Sectors Source: CSO (2019) NTMA calculations Note GVA figures are not adjusted for distortions by multinationals. ^ Wage Bill is given by 11 compensation of employees in national accounts ^^ Profits are given by Gross Operating Surplus in national accounts; *Construction set to re-open gradually from May 18 th

On a relative basis Ireland could perform better than most EU peers – thanks to big tech/ social media companies The Irish wage bill is not going to be as ICT sector will be a bulwark in protecting impacted as other countries incomes in Ireland Latvia Ireland Lithuania UK France Latvia Spain Sweden Netherlands Finland UK Luxembourg Malta France Cyprus Malta Sweden Netherlands Portugal Germany Luxembourg Denmark Denmark EU 27 Austria Cyprus EA 19 EA 19 Finland Slovakia EU 27 40% of Slovenia Lithuania Belgium Spain wage bill in Greece Austria most Italy Belgium Ireland affected Slovenia Slovakia Italy sectors Germany Portugal Greece 30 35 40 45 50 0.0 2.0 4.0 6.0 8.0 10.0 Compensation of Employee in most affected sectors (% of total) % of Compensation of Employee % of Employment Source: Eurostat (2019) Note: Most affected sectors include construction, wholesale and retail trade, transport, 12 accommodation and food service activities, real estate activities, professional, scientific and technical activities; administrative and support service activities, arts, entertainment and recreation