Ireland accelerates its phased re-opening Ireland’s economy and financial system was in good health before onset of pandemic June 2020
Index Page 3: Summary Page 8: Macro Page 15: Covid-19 fiscal response Page 24: Fiscal & NTMA funding Page 39: Long-term fundamentals Page 48: Property Page 54: Brexit Page 62: Other Data 2
Summary Ireland labour market and retail sales hit like rest of Europe; Ireland’s structural advantages should help cushion the blow
Economy grew strongly before Covid-19; unemployment may have peaked Irish wage bill less impacted – Robust growth in run up to U rate uncertain**; more lockdown returning to work in June ICT and Pharma help Latvia 30% 700 Lithuania France 25% 600 Spain Netherlands 20% UK 500 Malta Cyprus 15% 400 Sweden Portugal 10% Luxembourg 300 Denmark Austria 5% EA 19 200 Finland 0% EU 27 100 Slovenia -5% Belgium Greece 40% of wage 0 Italy bill in most -10% Ireland affected Slovakia sectors -15% Germany 1996 1999 2002 2005 2008 2011 2014 2017 30 35 40 45 50 Unemployment claimants (Index, Jan 20 = 100) Compensation of Employee in most GDP Underlying* affected sectors (% of total) Source: CSO * Underlying series is modified final domestic demand (excludes inventories) ** There are definitional questions around whether those on government income supports are unemployed. 4 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 curr currently y at t Irela eland is is in in rece ecess ssion. Key has has be been hi hit t har hard li like oth others s 6.5% .5% of of GNI* NI*, mor ore cou ould question is qu is for or ho how lon long? but in but internati tionally lly tr trad aded fol ollow if if nee needed. sec ectors s (Pharm rma and and ICT) ) wil ill This his is is a a bl black ck swan event. The he help weath help ther r the the stor orm 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 in interest t cos osts ts an and al allow so o for orecasti ting is is of of li littl tle val alue. Brexit Br t ris risk k in in bac background nec necess ssary ry fis iscal roo oom 6
NTMA has already funded € 18.5bn of revised funding plan of € 20-24bn for 2020 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 affi firmed in in AA the fin the inal 2020 rede edempti tion average maturi riti ties s in in Eur Europe spa pace 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 ECB’s QE enabled NTMA to On n rela elati tive ba basi sis, s, hi hit t to o Irela eland extend deb debt t maturi rities, redu 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 No Now ECB CB is is buyi buying ag aggress ssively y rela elati tively smaller dom domesti tic pa paper an and the the Rai ainy Da Day Fun und ag again with ith few li limitati tions s sha hare of of ec economy an and touri ourism sm 7
Section 1: Macro Monthly data show drastic fall in output but economy should rebound as re-opening accelerates
Labour market highlights the stark Covid-19 impact but uncertainty about exact numbers as of now True unemployment rate is uncertain: Covid- A million getting income supports - unclear how many would be considered unemployed 19 adjusted rate 26.1%* down from 28.2% 30 2.4 millions 26.1 Large caveat: CSO has urged caution 2.3 25 on Covid-19 data. The true labour force number is unknown – the 2.2 labour force survey for Q2 will be key 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 5.6 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 CSO have estimated the upper bound of the unemployment rate at 26.1%. There is no official data on how employment has been affected yet. The next labour force survey may answer questions 9 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.
Government’s income supports have peaked: those on TWSS are still employed; PUP unemployed Those on supports peaked in April – Around 40% of workforce have received either one of two Covid-19 income supports numbers will fall as re-opening accelerates 250 100% 1.2 Millions 225 90% 200 80% 175 70% 1 PUP – 515k 150 60% TWSS – 405k 125 50% 100 40% 0.8 75 30% 50 20% 25 10% 0.6 0 0% 0.4 0.2 0 W3 W4 W1 W2 W3 W4 W5 W1 W2 W3 W4 W1 Temporary Wage Subsidy Scheme March April May June Pandemic Unemployment Payment PUP TWSS Total % of Sector Employment (RHS) 10 Source: Department of Social Protection (as of 8 June), Revenue(as of 11 June), CSO
Ireland’s cautious lockdown contributed to lower May PMI; June’s accelerated re -opening will help remedy this Ireland’s Composite PMI at 25.7 in May, Manu PMI has been less impacted – services Manufacturing held up at 39.2 recovering slowly given cautious re-opening 50 70 45 60 40 35 50 30 40 Manu 25 39.2 20 30 15 Comp 25.7 10 20 Services 5 23.4 10 0 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 April May Services Manufacturing Composite 11 Source: Markit, Bloomberg
Roadmap for phased re-opening laid out by Government has been accelerated as new cases have dropped 600 Phase One: 500 Outside Partial Works - Shut Construction, Phase Two: down garden centres Small Phase Three: 400 retail Hotels, some outlets, pubs, Phase Four: shopping malls cafes Barbers, other restaurants, 300 services museums 200 Full Lockdown 100 0 29-Feb 07-Mar 14-Mar 21-Mar 28-Mar 04-Apr 11-Apr 18-Apr 25-Apr 02-May 09-May 16-May 23-May 30-May 06-Jun 13-Jun 20-Jun 27-Jun 04-Jul 11-Jul 18-Jul 25-Jul 01-Aug 08-Aug Daily cases (7 day average)* Source: HSE, Department of the Taoiseach, NTMA analysis *Daily cases are adjusted for backlog of testing. Main occurrence meant cases related to end-March/early April but were not confirmed until mid April. ** Roadmap subject to change. Arrows are illustrative. Covid-19 cases & other indicators will need be 12 contained for Ireland to move through the proposed phases. Ultimately the re-opening will be guided by public health advice.
Consumption data shows drop in April; timely payment data shows rebound in May Card data shows consumption fell sharply Retail sales were as bad as expected in April – food & online sales helped cushion blow from mid-March & rebound in recent weeks 30% 1600 1400 20% 1200 10% 1000 0% 800 -10% 600 -20% 400 Turnover generated € value of card payments in April -30% by online sales down up to 35% y-o-y* before 200 increased 244% in rebound in May -40% April 0 07/03 14/03 21/03 28/03 04/04 11/04 18/04 25/04 02/05 09/05 16/05 23/05 30/05 -50% 2016 2017 2018 2019 2020 All Retail Food Retail Spending on debit and credit cards ( € m, 7 day sum) Source: CSO; DataStream; NTMA calculations; CBI Using Household Budget survey data, we can estimate how much consumption of goods and services can still occur during the lockdown. We make allowances for extra grocery shopping and reduced 13 housing costs given government moratorium policy. * This can be seen as an upper bound, revisions may reduce this.
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