Ireland: Cautious lockdown continues before vaccine underpins recovery - Vaccines, household savings and external environment give optimism from ...
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Ireland: Cautious lockdown continues before vaccine underpins recovery Vaccines, household savings and external environment give optimism from H2 onwards April 2021
Index
Page 3: Summary
Page 8: Macro
Page 21: Fiscal
Page 31: NTMA Funding
Page 45: Structure of Irish Economy
Page 55: Brexit
Page 61: Property
Page 68: Banks and Other Data
2
Summary Irish economy has shown remarkable resilience amid Covid shock
2020 Economic performance showed resilience; Cautious
Q2 before vaccine rollout underpins H2 recovery
GDP remained positive in 2020 Unemployment increase as Value added from ICT & pharma
but domestic sectors hit lockdown impacts Q1 has given Ireland resilience
35% 700 200.0
30% 180.0
600
25% 160.0
20% 500 140.0
15% 120.0
400
100.0
10%
300 80.0
5%
60.0
0% 200
40.0
-5%
100 20.0
-10%
0.0
0
-15%
2008
2010
2012
2014
1996
1998
2000
2002
2004
2006
2016
2018
Nov-20
Jan-20
Feb-20
Apr-20
May-20
Jul-20
Sep-20
Jan-21
Feb-21
Mar-20
Aug-20
Dec-20
Jun-20
Oct-20
-20%
2005
2007
2010
2012
2015
2017
2020
GVA: Multinational dominated
Unemployment claimants sectors (€bns)
Domestic Demand GDP (Index, Jan 20 = 100)
GVA: Domestic sectors
Source: CSO
* Domestic demand series accounts for multinational activity and known as modified final domestic demand
(excludes inventories)
4
** Whether those on government income supports are unemployed is statistically debatable. Some will have
left the labour force, others are just temporarily furloughed.
Ireland’s debt figures to reverse in 2020 and 2021 as large
fiscal response needed; Govt. to set path back to balance
Run of primary surpluses Debt position reversed in 2020 Debt fell from 166% to 95% of
before ‘20 GG deficit c. €19bn national income pre-Covid
180%
10
160%
5 Debt-to-GNI* 140%
(108% 2020f; 95% in 2019)
0 120%
Debt-to-GG Revenue 100%
-5
(259% 2020f; 230% in 2019) 80%
-10
60%
-15
Average interest rate
40%
(1.9% 2020f, from 2.2% in 2019)
-20 20%
Debt-to-GDP 0%
-25 1995 2000 2005 2010 2015 2020f
1995 2000 2005 2010 2015 2020f
(60% 2020f, from 57% in 2019)
GG Balance Primary Balance Debt to GNI* Debt to GDP
Source: CSO, Department of Finance
^ due to GDP distortions, Debt to GDP is not representative for Ireland, we suggest using other 5
measures listed.
Covid-19 and Ireland: significant hit to domestic economy
followed by powerful policy response
Recession Exposure Policy
Ireland (ex. Multinationals) is in Ireland’s domestic economy hit Significant stimulus announced
recession. But income levels hard like others but equivalent to 19% of GNI* over
have been maintained through internationally-traded sectors 2020 and 2021.
government action. (Pharma/ICT) have thrived.
ECB and Fed actions should cap
Current lockdown will impact Proposed OECD corporation tax interest costs and allow
Q1 but smaller than initial reform may impact IE economic necessary fiscal room.
lockdown. model in the medium term.
6
NTMA has indicated a funding plan of €16 - €20bn for 2021
€7bn already funded this year
Flexibility >10 years AA-
Ireland has large cash balances Weighted average maturity of Ireland has been affirmed in AA
and a year free of maturing debt one of longest in Europe. space by S&P.
bonds in 2021.
The ECB’s first QE program On relative basis, hit to Ireland
In addition to bond funding, enabled NTMA to extend debt less than for other countries
Ireland received €2.5bn in EU maturities and reduce interest given multinationals, relatively
Sure funding in Q1. cost. Now ECB buying in large smaller domestic share of
amounts with few limitations. economy and tourism.
7
Section 1: Macro Domestic economy hit hard by restrictions but resilience shown in income, tax and exports data
Current lockdown has stabilised case numbers;
restrictions in effect until April 5; cautious thereafter
14 day cumulative Covid-19 cases/deaths Ireland case numbers versus other countries
per 100k of population (per 100k of population)
1,400 2021 Q1 25 1,600
lockdown 1,400
1,200
20 1,200
1,000 1,000
15 800
800
600
600
10 400
400 200
5 -
200
Sep-20
Feb-21
Apr-20
Jul-20
Mar-20
Nov-20
Jan-21
Mar-21
Aug-20
Jun-20
Oct-20
Dec-20
May-20
- -
Jan-21
Apr-20
Nov-20
Mar-20
Jul-20
Aug-20
Sep-20
Feb-21
Mar-21
May-20
Dec-20
Jun-20
Oct-20
Ireland France Germany
Italy Spain US
Cases Deaths (RHS) UK
Source: DataStream 9
Covid policy has been cautious while the vaccine rollout
progresses
Oxford Stringency Index (0-100 scale) Ireland’s vaccine rollout – better than EU
Ireland strict comparatively incl. at present average but lagging the front runners
100 120
90
100
80
70 80
60
60
50
40
40
30 20
20
0
10
Belgium
Italy
France
Israel
Chile
Denmark
Norway
Greece
Finland
EU
Sweden
UK
Germany
US
Hungary
Ireland
Spain
Portugal
Canada
0
Jan-20
Apr-20
Jul-20
Nov-20
Jan-21
Feb-20
Mar-20
Sep-20
Feb-21
Mar-21
Aug-20
Dec-20
Jun-20
Oct-20
May-20
No. of Doses Administered per 100 people
Source: University of Oxford, DataStream 10
Number of doses could at a maximum be 200 doses per 100 people given most vaccines require two
doses.The effects of the Q1 lockdown are evident but not as
severe as the initial Covid lockdown
Those on government supports Spending fell sharply in Jan. Q1 Hit to PMIs not as great as
well below levels seen in Q2 2020 but has since recovered during the first Covid shock
1.2 2020 Q2 2021 Q1 10% 70
Millions
lockdown lockdown 5%
60
1 0%
50
0.8 -5%
-10% 40
0.6 -15% 30
-20%
0.4 20
-25%
0.2 -30% 10
-35% 0
0
Jan-18
Apr-18
Jul-18
Jan-19
Apr-19
Jul-19
Jan-20
Apr-20
Jul-20
Jan-21
Oct-18
Oct-19
Oct-20
-40%
March
December
June
January
April
July
August
September
October
May
November
February
Apr-20
Nov-20
Jan-20
Feb-20
Mar-20
Jul-20
Aug-20
Sep-20
Jan-21
Feb-21
May-20
Dec-20
Mar-21*
Jun-20
Oct-20
Services
Spending on debit and credit cards Manufacturing
Number of people on income
support schemes (y-o-y change) Composite
Source: CSO, Department of Social Protection, Revenue, CBI, Markit 11
* March data is to 22nd MarchOn a relative basis Ireland performed well in 2020 – thanks
to ICT (tech) and pharmaceutical firms
Real GDP up 2.5% Y-o-Y in 2020 for Ireland: Real MFDD down 5.4% Y-o-Y in 2020: MFDD
GDP overstates impact of multinationals understates impact of multinationals
4% 0%
2%
-2%
0%
-2% -4%
-4% -6%
-6%
-8%
-8%
-10% -10%
-12%
-12%
Denmark
NL
Belgium
France
Italy
Norway
EA
Sweden
Finland
S Korea
Australia
Germany
US
Japan
Austria
Ireland
New Zealand
Canada
Portugal
Switzerland
Denmark
NL
Italy
Sweden
Belgium
France
Finland
UK
S Korea
US
Austria
Germany
Ireland
EA-19
Japan
Portugal
Switzerland
Y-o-Y impact to GDP (Q1-Q4, 2020 constant prices) Y-o-Y MFDD impact (Q1-Q4 2020, constant prices)
Source: CSO, DataStream (seasonally adjusted data – 3.4% for non seasonally adjusted data) 12
Note: MFDD for Ireland is modified for multinational activity by Ireland’s Central Statistics Office (CSO). For
other countries MFDD = Domestic demand = Consumption + Government (current) spending + InvestmentSector breakdown for 2020 – Multinationals racing ahead,
domestic side hit hard
20% 15.2% 13.1% Domestic sectors hit badly – 26% of
10% economy in these four categories
0%
-0.5% -1.1% -1.6% -1.7%
-10%
Two sectors least
impacted are -12.6%
-20% dominated by FDI
-15.4% -16.9%
-30%
-40%
-50%
-60% -54.4%
Industry (incl. ICT Fin & Public, Educ Agri, Fish Real Estate Construction Prof, Admin Dist, Trans, Arts & other
Pharma) insurance & Health & Support Hotels & Rest
GVA Growth (2020, constant prices)
13
Source: CSOLabour market data shows stark Covid-19 impact; 2021 has
seen a reversal in unemployment rate
True unemployment rate is uncertain: 10% fall in actual hours worked per week in
Covid-19 adjusted rate 25%* in February 2020; MDD fall smaller due to productivity mix
35 2.5
Millions
30
2
25
1.5
20
1
15
Those “Away from Work” increased
10 0.5
on average by 175k in 2020
- impacted heavily by Covid
5 0
2018 2019 2020
0
Away from work' (employed but not working)
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Unemployment
Unemployment Covid-19 Adjusted Unemployment Employment (those at work)
Source: CSO
* The CSO have estimated the upper bound of the unemployment rate at 24.8% in January. The CSO
have urged caution around labour market data given the likelihood of revisions and the unique nature 14
of employment status for some people in the pandemic.Approx. 800k on income support in Jan/Feb as lockdown
in place; schemes maintain aggregate household income
Those on the PUP and EWSS likely to remain Supports mean compensation of employees
at current level for March actually grew in 2020 (aggregate basis)
1.2 20%
Millions
1 15%
0.8
10%
0.6
5%
0.4
0%
0.2
-5%
0
-10%
Temporary Wage Subsidy Scheme/Employment Wage Compensation of employees (y-o-y growth rate,
Subsidy Scheme nominal)
COE incl. Covid govt. supports
Pandemic Unemployment Payment
Source: Revenue, DEASP, CSO, Revenue 15Consumption fell sharply in 2020 – down 9.1% versus
2019 despite incomes being maintained
Consumption sharply hit in Q2: Q4 saw a Retail sales numbers volatile on switch in
step back from Q3 level – down 9.1% y-o-y and out of lockdown
30 20% 40% 2020Q2 2021Q1
lockdown lockdown
15% 20%
25
10% 0%
20 5%
-20%
0%
15 -40%
-5%
-60%
10 -10%
-80%
-15%
5 -100%
-20%
2020M03
2019M01
2019M03
2019M05
2019M07
2019M09
2019M11
2020M01
2020M05
2020M07
2020M09
2020M11
2021M01
0 -25%
1997 2000 2003 2006 2009 2012 2015 2018
Consumption Growth (Y-o-Y, RHS) All Retail Food Retail
Consumption (€bns, LHS) Bars Department Stores
Source: CSO
16Household balance sheets in stronger position: debt levels
much lower coming into pandemic + new Covid savings
Gross HH saving rates jumped 2020 on back Legacy of 2008-12 financial crisis is on the
of forced savings – IE larger than most Government balance sheet
24 400%
2014-19 Economic growth
350% allowed smooth private
20
% of Disposable Income (4Q MA)
sector deleveraging
300%
16 250%
200%
12
150%
8 100%
50%
4
0%
Public and Private Private debt (% of Public debt (% of
0
debt (% of GNI*) GNI*) GNI*)
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
2003 2008 2013 2020H1
Ireland EA-19 UK
Source: Eurostat, ONS, CSO ; CBI,
Note: Gross Savings as calculated by the CSO has tended to be a volatile series in the past, some
caution is warranted when interpreting this data
Note: Private debt includes household and Irish-resident enterprises (ex. financial intermediation) 17
CBI quarterly financial accounts data used for household and CSO data for nominal government
liabilities.Investment hit as construction sector has moved in & out
of lockdown; closed in Q1 but likely to open in Q2
Employment in construction remained down Another surge of IP into Ireland in 2019-2020
in Q4 2020 but investment has rebounded – helps ICT but distorts investment picture
300 10 200
9 180
250 160 Four-quarter
8 sum (€bns)
140
7
200 120
6
100
150 5
80
4
60
100
3 40
2 20
50
1 0
2004
2016
1996
1998
2000
2002
2006
2008
2010
2012
2014
2018
2020
0 0
2006 2008 2010 2012 2014 2016 2018 2020
Building Investment Other Domestic Investment
Construction Employment (000s) Distortions (mainly IP) Modified GFCF
Building GFCF (€bn RHS) Total GFCF
Source: CSO; NTMA calculations 18External environment supportive – 2021 should see the
global economy rebound given large stimulus & vaccines
Exports driven by demand for multinationals
2020 2021
products – Pharma. and Tech
Maximum Maximum 50%
EA Monetary Policy
accommodative accommodative
40%
EU Fiscal Policy Expansionary Expansionary
30%
Maximum Maximum
US Monetary Policy
accommodative accommodative 20%
US growth Covid-19 shock Rebound 10%
0%
Significantly down Rising but
Oil price
despite rebound contained -10%
Covid-19 shock; Brexit resolved; -20%
UK growth
Brexit unresolved Rebound 2000 2003 2006 2009 2012 2015 2018
Euro Growth Covid-19 shock Rebound Exports
Chemical Products and Computer Services
Strengthening vs.
Euro currency Unclear Exports ex. Chem & Comp
Dollar
Source: NTMA analysis, DataStream, CSO 19Philips curve relationship has held in the past in Ireland
but not recently and we are some way off full employment
Inflation subdued in Ireland for close to a Full employment has led to inflation in past
decade despite strong growth but a long way from there currently
7.0 12.0%
Average nom. MDD
6.0
growth in 2014-19: 6% 10.0%
5.0 y = -0.7267x + 0.0943
Nominal COE growth per head*
8.0% R² = 0.8
4.0
3.0
6.0%
2.0
2020
1.0 4.0%
outlier
- 2.0%
-1.0
0.0%
-2.0
-3.0 -2.0%
-4.0
-4.0%
1997
2008
2019
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2020
2021
2.0% 5.0% 8.0% 11.0% 14.0% 17.0% 20.0%
HICP Ireland HICP Euro Area Unemployment Rate
Source: CSO, NTMA analysis; 20
*Non-Agriculture employment /wage data on yearly basis (1999-2020)Section 2: Fiscal Revenues have held up well with deficit expansion nearly all spending related
Fiscal policy response was swift in 2020; Conservatism in
Budget 2021 allows for continued flexibility
Response Revenues Debt
Total fiscal response of €38bn Ireland’s economic structure has Debt ratios will reverse due to
over 2020 and 2021 (19% of meant revenues have held up Covid.
GNI*) is large. despite Covid-19.
Ireland has responded to Covid Strength of both Corporate and Gross Government debt 57% of
with first attempt at counter- Income tax revenues from GDP at end-2019 but close to
cyclical fiscal policy in its 100 multinational sectors has helped 95% of GNI*. Ratios were c.60%
year history. sustain government coffers. and 108% for end-2020.
22Large fiscal response of €38bn over 2020/21 (19% of GNI*)
€5.5bn contingency to help with lockdown costs
€bn 2020 2021 % GNI* Description
Taxation Measures 4.1 3.4 0.7 2.1
• Warehousing/Deferrals 2.0 2.0 0.0 1.0 Corporate Tax, VAT, Stamp duty tax deferrals
Temporary VAT decrease; hospitality VAT decrease,
• Other 2.1 1.4 0.7 1.1
CRSS
Expenditure Measures 28.7 16.8 11.9 14.1
• Social Protection PUP/TWSS extended into 2021; TWSS transforming
13.6 10.4 3.2 6.7
(income supports) into EWSS
• Health 4.4 2.5 1.9 2.2 Covid-19 capacity expenditure
Business supports, Grants, Education, Arts, Tourism
• Business Supports 1.0 0.9 0.1 0.5
and Transport
• Housing, Local Govt 1.2 1.1 0.1 0.6 Commercial Rates waivers
Help-to-Buy, other grants and aids, Recovery Fund,
• Other 8.5 1.9 6.6 4.2
Covid contingency response
Total Direct Supports 32.8 20.2 12.6 16.2
Credit Guarantee Scheme, Pandemic Stabilisation
Indirect supports 5.0 5.0 0.0 2.5
and Recovery Fund, other schemes
Total Supports 37.8 25.2 12.6 18.7
Source: Department of Finance 23Ireland fiscal response highly skewed to direct supports -
one of highest % in EU for direct support
Combined 2020/21 Covid-19 fiscal response 2020 General Government Balance – Ireland
(% of GDP/GNI*) close to Euro Area average (% of GDP)
50 0
45 -2
40
-4
35
-6
30
25 -8
20 -10
15 -12
10
-14
5
-16
0
NL
NZ
Italy
Denmark
Norway
Sweden
Belgium
France
Finland
Australia
IE (GNI*)
USA
Singapore
UK
Germany
Ireland
Korea
Canada
Japan
Spain
Switzerland
-18
NL
Italy
Cyprus
Sweden
Denmark
Greece
France
Belgium
Finland
Austria
UK
LX
Portugal
Germany
US
Ireland
Slovenia
EA-19
Slovakia
Spain
Japan
Switzerland
Ireland (GNI*)
Direct Supports Indirect Supports
Source: IMF, European Commission, Department of Finance 24
Direct supports = Additional spending and forgone revenue
Indirect supports = Equity, loans, and guaranteesFiscal discipline in evidence in last decade – after Covid-19
stimulus ends Ireland plans to narrow its deficit again
Gen. Govt. Balance (% of GNI*) will be in Revenues holding up despite pandemic;
significant deficit in 2020/21^ Deficit mostly due to expenditure increase
10% 30%
25%
5%
20%
15%
0%
10%
-5% 5%
0%
-10% -5%
2020
GGB % of GDP -5.5% -10%
-15% GGB % of GNI* -9%
-15%
-20% -20%
2020 vs 2019
Income tax VAT Excise duties
GG Balance (% GNI*) Primary Balance (% GNI*) Corporation tax Total Revenue Total Expenditure
Source: CSO; Department of Finance 25
^ Underlying GG and primary balance numbers used (excludes banking recapitalisations)Gross Government debt c. 60% of GDP at end-2020 but
close to 108% of GNI*
Debt-to-GNI* had dropped since last crisis; Primary balance main contributor to debt
could increase 20pp in coming years ratio deterioration
180% 15.0%
160% 10.0%
5.0%
140%
0.0%
120%
-5.0%
100%
-10.0%
80% -15.0%
60% -20.0%
40% -25.0%
~
20% -30.0%
-40%
2021f
2007
2018
1998
1999
2000
2001
2002
2003
2004
2005
2006
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2019
2020
0%
1995 1999 2003 2007 2011 2015 2019 Primary Balance (% of GNI*)
Debt to GNI* Debt to GDP Debt Stabilising PB (% of GNI*)
Source: CSO; Department of Finance, NTMA analysis 26Low interest rates coupled with reversion to growth may
see helpful “i-g” snowball effect on debt ratios
With low rates locked in, Ireland’s “hurdle Histogram of Ireland’s recent growth history
rate” for a positive snowball effect is low (2001-2020)
20% 9
Nominal GNI* grew by
8 more than 4% in 14 of
15%
7 last 20 years
10%
Number of years
6
5% 5 Average interest rate
likely between 1-2%
0% 4
for next few years
3
-5%
2
-10% 1
-15% 0
8-10%
12%+
-6-4%
-4-2%CT revenue cushioned by 2019 payments and defensive
nature of Pharma and ICT; income tax protected also
Corporation tax (CT) receipts continue to Progressiveness of income tax system and
rise – have nearly tripled in 6 years sector mix limits hit to overall receipts
24% 14.0 40%
20% 12.0 35%
10.0 30%
16%
8.0 25%
12%
6.0 20%
8% 15%
4.0
4% In 2019, 40% of CT paid 2.0 10%
by 10 companies
0% - 5%
2021f
1997
1995
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
0%
Corporation Tax (€bns, RHS)
Corporation Tax (% of tax revenue)
Corporation Tax (% of GG Revenue) % of taxable income cases % of income tax collected
Source: Department of Finance, Revenue, NTMA analysis
Note: Most affected sectors include construction, wholesale and retail trade, transport, accommodation 28
and food service activities, real estate activities, professional, scientific and technical activities;
administrative and support service activities, arts, entertainment and recreationNTMA’s job is to finance the cash deficit (EBR) but it’s best
to use accruals-based GGB for comparison to peers
Methodological
EBR and GGB (€bns) usually minor – gap is EBR GGB
Differences
larger currently
Accounting basis Cash (exchequer) Accrual
10 Financial
Included Excluded
transactions
0
Subset of Central Includes all of
Scope
Govt. Central & Local
-10
Intra-Government
No Yes
Consolidation
-20
2020 2021 Comments
This is the deficit in cash terms that the
-30 EBR -12.3 -17.6 NTMA must finance each year
Prom. Note capital Accruals can relate to interest, taxes, other
transfer to recap Adjust for Accruals 3.1 0.4 expenditures
-40
banks hit GGB in Transactions between the Exchequer and
Exclude Equity &
2010 but not EBR -4.6 -1.5 NAMA, CBI and other govt. entities: this
Loan Transactions benefits funding req.
-50 (non-cash Archaic funding structure of social insurance
expenditure) Social Insurance
-2.2 -0.6 in Ireland is outside Exchequer. Consolidated
Fund in GGB
-60
Semi State, ISIF, Dividends and profits from government
-0.2 -0.2 entities
other funds
Local Govt. -1.0 -0.9 Local governments fund themselves
GG Balance EBR Outturn different than forecast for EBR walk.
Unspecified -1.8 This category is a placeholder until further
information is available
Most complete metric for fiscal position.
GGB -19.0 -20.5 Use this for deficit comparison with other
Source: CSO, nations 29
Department of Finance,
NTMA analysisNeed to assess other metrics apart from debt to GDP when
analysing debt sustainability
2020F GG debt to GG revenue % GG interest to GG rev % GG debt to GDP %
Greece 411.7% 6.1% 207.1%
Italy 332.7% 7.5% 159.6%
Portugal 316.1% 6.9% 135.1%
Spain 292.8% 5.8% 120.3%
Cyprus 272.7% 5.7% 112.6%
Ireland 264.0% 4.6% 63.1%
Belgium 234.5% 4.1% 117.7%
France 220.1% 2.6% 115.9%
EA19 218.8% 3.4% 101.7%
Slovenia 182.2% 3.8% 82.2%
EU28 177.2% 3.5% 79.4%
Austria 175.8% 2.9% 84.2%
Germany 154.1% 1.5% 71.2%
Slovakia 149.2% 3.0% 63.4%
Netherlands 142.2% 1.4% 60.0%
Finland 134.3% 1.4% 69.8%
Source: EU Commission forecasts
Ireland 107.8% Debt to GNI* ratio in 2020 (Budget 2021 Forecast) 30Section 3: NTMA Funding Flexibility in funding strategy due to smooth maturity profile and no 2021 bond redemptions
NTMA has indicated a funding plan of €16 - €20bn for 2021
€7bn already funded this year
Flexibility >10 years AA-
Ireland has large cash balances Weighted average maturity of Ireland has been affirmed in AA
and a year free of maturing debt one of longest in Europe. category by S&P.
bonds in 2021.
The ECB’s first QE program On relative basis, hit to Ireland
In addition to bond funding, enabled NTMA to extend debt less than for other countries
Ireland received €2.5bn in EU maturities and reduce interest given multinationals, relatively
Sure funding in Q1. cost. Now ECB buying in large smaller domestic share of
amounts with few limitations. economy and tourism.
32Flexibility helped by smoother maturity profile and no bond
redemptions in 2021
20
18
16
14
12
10
Billions €
8
6
4
2
0
Bond (Fixed) EFSM EFSF Bond (Floating Rate) Green Other (incl. Bilateral)
Source: NTMA
Note: EFSM loans are subject to a 7-year extensions. It is not expected that Ireland will refinance any of
its EFSM loans before 2027. As such we have placed the pre-2027 EFSM loan maturity dates in the
33
2027-33 range although these may be subject to change.Near-term redemptions much lower than last four years;
lower borrowing costs also provides NTMA with flexibility
NTMA issued €99.5bn MLT debt since 2015; Even with extra Covid-19 borrowings, NTMA
13.1 yr. weighted maturity; avg. rate 0.76% might not match supply in 2017-2020 period
7.0 27 80
€ Billions
6.0 24
5.5 70
5.0 21
3.9 18 60
4.0
2.8 15
3.0 50
12
2.0 1.5
9 40
0.8 0.9 1.1 0.9 0.2
1.0 6
10Y 10Y 7Y -0.2 30
0.0 5Y 5Y 10Y 7Y 5Y 12Y 12Y 10Y 3
8Y 10Y 16Y 30Y 10Y 20Y 15Y 30Y 15Y 10Y
-1.0 0 20
2012201320142015201620172018201920202021
YTD 10
Auction
Syndication 0
Weighted Average Yield % (LHS) Issuance (2017-2020) Redemptions (2021-2024)
Source: NTMA 34
Only showing marketable MLT debt (auctions and syndications). Other issuance such as inflation
linked bonds, private placement and amortising bonds occurred but not shown.The NTMA has taken advantage of QE to extend debt
profile since 2015
Various operations have extended the …Ireland (in years) now compares
maturity of Government debt … favourably to other EU countries
20 12
18
10
16
14 8
12
6
10 10.9 10.8 10.6
8 4 8.0 8.0 7.6 7.3 7.2 6.9 6.9 6.8
6
2
4
2 0
AT BG IR ES FR NL DK FN IT BD PT
0
2015 2016 2017 2018 2019 2020 2021
YTD
Govt Debt Securities - Weighted Maturity
Weighted Average Maturity Issued (Years)
EA Govt Debt Securities - Avg. Weighted Maturity
Source: NTMA for Ireland data; ECB for other countries 35
Note: Weighted maturity for Ireland includes Fixed rate benchmark bonds, FRNs, Amortising Bonds,
Notes issued under EMTN programme, T-Bills and ECP Data. It excludes programme loans and retail.Various sources of funding will be used to meet Covid-19
borrowing requirements: cash balance and flexibility key
€24
• No bonds mature in 2021. The last of the UK
Run-down of cash: 1
bilateral loan matures in 2021. Other: 4
Other: 1
€20
Sure: 2.5
• The Exchequer Borrowing Requirement (EBR) for UK Bilateral: 0.5
2020 was lower than expected at €12.3bn. €16
• Thus, NTMA entered 2021 with a larger cash
€12
balance of €17.4bn.
Bond
EBR: 18 issuance:
• NTMA has received monies from the EU SURE €8 18
scheme. It is a diversified source of funding in
2021 (c. €2.5bn). €4
• End year cash balances are currently forecasted at
€16bn. €-
Funding Requirements Sources of Funding (€bn)
Source: NTMA
(€bn)
Notes:
Rounding may affect totals as some figures have been rounded up to the nearest €bn.
1. In its 2021 Funding Statement of December 2020, the NTMA outlined its plan to issue €16-€20bn in
long term government bonds. €18bn is reflected as an indicative estimate in the chart.
2. Other funding needs includes provision for the potential bond/FRN purchases and general
contingencies.
3. Other funding sources includes retail (State Savings), private placements and EIB loan drawdowns.
4. SURE refers to the European instrument for temporary Support to mitigate Unemployment Risks in
36
an Emergency.
5. EBR is the Department of Finance’s estimate of the Exchequer Borrowing Requirement for 2021.In addition to PSPP, ECB’s PEPP with its flexibility (no
limits) & size (€1.85trn) will underpin Irish bond market
6 70
€ Billions
PEPP monthly IGB purchases running 60
5 at roughly €1.2bn a month before
ECB decision to speed up purchases
50
4
40
3
30
2
20
1 10
0 0
Q1 2021f
Q2 2021f
Q3 2021f
Q4 2021f
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2019
PSPP Net IGB purchases (LHS) PEPP/PSPP net purchases (LHS)
Cumulative Net ECB Purchases (RHS)
Source: ECB, NTMA Calculations
Notes:
Forecasts sees Ireland’s capital key of 1.69% and assumes 90% of new purchases will be for public sector 37
assets with 7% of public sectors assets being supranational issuers.Diverse holders of Irish debt – sticky sources account for
over 50%; will increase further with Eurosystem’s PEPP
Ireland roughly split 80/20 on non-resident “Sticky” sources - official loans, Eurosystem,
versus resident holdings (Q3 2020) retail - make up over 50% of Irish debt
250
200
Other Debt
(incl. IGBs - 150
Official) Private Non
27% Resident
100
33%
Retail, 50
Resident
IGBs -
11%
Private 0
2010
2017
2007
2008
2009
2011
2012
2013
2014
2015
2016
2018
2019
2020
Resident
Eurosystem
23% Short term 5%
2%
IGBs - Private Non Resident IGBs - Private Resident
IGBs - Private Non Resident IGBs - Private Resident Short term Eurosystem
Short term Eurosystem Retail Other Debt (incl. Official)
Retail Other Debt (incl. Official) Total Debt (€bns)
Source: CSO, Eurostat, CBI, ECB, NTMA Analysis
IGBs excludes those held by Eurosystem. Eurosystem holdings include SMP, PSPP and CBI holdings of
FRNs. Figures do not include ANFA. Other debt Includes IMF, EFSF, EFSM, Bilateral as well as IBRC- 38
related liabilities. Retail includes State Savings and other currency and deposits. The CSO series has
been altered to exclude the impact of IBRC on the data.Investor base for Government bonds is wide and varied
Investor breakdown: Country breakdown:
Average over last five syndications Average over last five syndications
7.6%
10.0%
15.2%
10.6% 34.2%
24.8%
42.0% 9.2%
45.0%
Ireland UK
Fund/Asset Manager Banks/Central Banks*
US and Canada Continental Europe
Pensions/Insurance Other Nordics Asia & Other
Source: NTMA 39
* Does not include ECB. ECB does not participate on primary market under its various asset purchasing
programmesIrish Sovereign Green Bonds (ISGB) - €6.1bn issued with
€3.9bn allocated to green projects
• Launched 2018 April 2021 Update
• Based on ICMA Green Bond Principles – Use of proceeds • €6.1bn nominal outstanding (€6.5bn cash
model
• Governed by a Working Group of government equivalent)
departments and managed by the NTMA • €3.9bn allocated to eligible green projects
• Compliance reviews by Sustainalytics since inception
• €2.6bn remaining to be allocated to eligible
expenditure in 2020
• Issuance through two syndicated sales and
one auction
• Pipeline for eligible green expenditure
remains strong
• ISGB 2019 Allocation Report
• ISGB 2017/2018 Impact Report
Irish Rail train at Avoca on the Dublin to Rosslare route. Heavy rail was allocated some €400m from
ISGBs in 2019
40Allocation of ISGB funding has focused on Water/Waste
management and transportation
€2,300
Allocation per eligible green category 2019
€2,200
€2,100 Built Environment/
€2,000 energy efficiency
11%
€1,900
Clean transportation
€1,800 35%
Allocation €million
2017/8 2019 2020frcst
Climate change
adaptation
Management of living
natural resources and
42% land use
1%
Renewable energy
8%
3%
Sustainable water and
Construction of the new water treatment plant at Vartry (March 2020) wastewater
management
41Irish Sovereign Green Bond Impact Report 2018: Some 50 Impact
measures reported
Some highlights from Report*
• Built Environment/ Energy Efficiency
– Energy saving (GigaWattHours) : 621.06
– GHG emissions reduced/ avoided in tonnes
of CO2 : 150.5
– Number of homes renovated : 27,549
• Clean Transportation
– Number of public transport passenger
journeys : 268.66 million
– Additional km of cycling infrastructure works
(feasibility/ design/ screening phase) : 85km
– Take-up of Grant Schemes/ Tax foregone
provided (number of vehicles) : 15,712
• Climate Change Adaptation (2017 and 2018)
– Number of properties protecting from
flooding on completion : 7,403
– Amount of damages/ losses avoided on
completion : €658 million
Waterford Greenway
*For a more detailed break-down please see the ISGB 2017/ 2018 Impact
42
Report hereIrish Sovereign Green Bond Impact Report 2018: Some 50 Impact
measures reported
Some highlights from Report
• Environmentally Sustainable Management of Living
Natural Resources and Land Use
– Number of hectares of forest planted : 4,025
– Number of hectares of peatlands restored :
203
• Renewable Energy
– Number of companies (including public sector
organisations) benefitting from SEAI Research
& Innovation programmes as lead, partner or
active collaborators : 68
– Number of SEAI Research & Innovation awards
benefitting research institutions : 52
• Sustainable water and wastewater management
– Water savings (litres of water per day) : 79.1
million
– New and upgraded water treatment plants :
10
– New and upgraded wastewater treatment
plants: 11
– Length of water main laid (total) : 416km
– Length of sewer laid (total) : 74km
Irish peatlands
43Ireland rated in “AA” category by Standard & Poor's
Date of last
Rating Agency Long-term Short-term Outlook/Trend
change
Standard & Poor's AA- A-1+ Stable Nov 2019
Fitch Ratings A+ F1+ Stable Dec 2017
Moody's A2 P-1 Stable Sept 2017
DBRS Morningstar A(high) R-1 (middle) Stable May 2020
R&I A+ a-1 Stable Jan. 2021
44
Source: NTMASection 4: Structure of Irish economy Multinationals distort Irish economy picture but have added resilience during Covid-19
Multinational activity has distorted Ireland’s data;
notwithstanding those issues, MNCs have real impact
Multinationals dominate GVA: profits are booked Domestic side of economy adds jobs; MNCs
here but overstate Irish wealth generation add GVA/high wages
Arts & Other
1% Share of Share of Share of Gross Weekly
Employment Wage Bill GVA Earnings € (Q4
Professional (2020) (2019) (2020) 2019)
services Public sector
9% 10% Agriculture 4.50% 1% 1% N/A
Industry (incl.
Pharma.) 12.20% 15% 40% 916
Industry (incl.
Real estate Pharma)
6% 40% Construction 6.20% 4% 2% 821
Financia Dist., Tran,
l& Hotel & Rest 25.40% 17% 9% 571
insuran
ce Dist, tran, ICT (Tech) 5.40% 9% 16% 1,241
6% hotel & rest Financial 4.50% 8% 6% 1,235
9%
Real Estate 0.40% 1% 6% 730
Construction ICT (Tech) Professional 10.80% 13% 9% 810
2% Agri, forest & 16%
fish Public Sector 25.60% 30% 10% 836
1%
Arts & Other 5% 2% 1% 514
Source: CSO 46Sizeable inflows of intellectual property into Ireland by
tech. & pharma. in recent years: exports & jobs created
Ireland is a leader in Computer Services; Enormous inflows of IP assets into Ireland
Exports have trebled since 2014 since 2015 on the back of BEPS reforms
140 18.0% 300
120 16.0%
14.0% 250 c.€500bn in
100 IP assets
€billions, Constant prices
12.0% transferred
80 10.0% 200 to IE since
8.0% 2015
60
6.0% 150
40
4.0%
20 2.0% 100
0 0.0%
2006
2014
2005
2007
2008
2009
2010
2011
2012
2013
2015
2016
2017
2018
2019
50
Computer Services Exports (€bn) 0
Chemical Products (€bn) 1995-2014 2015 2016-19
% of World Computer Services Exports (RHS) 2015 once-off IP assets increase estimate
% of World Chemical Products Exports (RHS) Fixed Capital Investment - IP assets
Source: IMF, UN Comtrade, CSO, NTMA Economics Calculations 47Ireland has deftly navigated the changing global economy
landscape this century (adjusted GVA for Ireland)
Euro Area manufacturing base hollowed out The digitalisation of the economy: Ireland
over time: Ireland less impacted than most able to grow its tech sector in recent years
2 3
0 2.5
Ireland: 3% of EA19
-2 2 tech sector wages
but only 1.4% of
-4 1.5
EA19 population
-6 1
-8 0.5
-10 0
-12 -0.5
-14 -1
Italy
Estonia
Italy
Estonia
Cyprus
Cyprus
Belgium
France
Latvia
Belgium
Ireland*
Greece
Greece
Austria
France
Finland
Latvia
Ireland*
Malta
Finland
Austria
EA 19
Malta
Slovenia
Slovenia
EA 19
Germany
Slovakia
Lithuania
Lithuania
Germany
Slovakia
Netherlands
Netherlands
Spain
Portugal
Spain
Portugal
Luxembourg
Luxembourg
Manufacturing GVA: pp change in share of economy since Tech Sector GVA: pp change in share of economy since
1999 1999
Source: Eurostat, NTMA calculations (1999-2019 data)
* Ireland’s GVA data has been adjusted to strip out the distortionary effects of some of the
multinational activity that occurs in Ireland. Specifically a profit proxy is removed from the GVA
data for the sectors in which MNCs dominate (parts of Manufacturing, ICT, and renting and leasing
services). Unadjusted Ireland’s figures are +7.1pp (manufacturing) and +6.5pp (tech sector).Adjusting for MNC profits, underlying economy was robust
pre-Covid: MNCs add real substance to IE economy
Ireland’s income = wages (all sectors) + Pre-Covid, Ireland had a robust underlying
domestic sectors profits + tax on MNC profits economy; compared favourably to EA
MNC sectors 250
contributed
€17bn CoE in ‘19 200 Index, Constant
prices, 100 = 2008
150
Comp of
Employee,
100
€100bn ,
MNC Sector
30%
Profits, 50
€142bn ,
43% 0
Three MNC sectors
contributed €5bn
in CT in 2019 Domestic MNC Sector Profits
Sector
Profits, Domestic Sector Profits
€90bn , 27% Compensation of Employee
Real GVA ex. MNC Sector Profits
Real GVA - EA19
Source: CSO, NTMA calculations (Nominal 2019 data used in left chart)
Ireland’s GVA data has been adjusted to strip out the distortionary effects of some of the
49
multinational activity that occurs in Ireland. Specifically a profit proxy is estimated for the sectors
in which MNCs dominate (MNC sectors = part of Manufacturing, ICT, and renting and leasing
services).The result of such high value MNC activity in Ireland:
Ireland less impacted by Covid - in particular the tax base
GDP overstates Ireland’s progress but is still a good Multinational sectors critical for Income tax
barometer for Revenue, in particular CT and IT
and Corporation tax: proven true in 2020
Income Revenue
Elasticity GG Revenue Tax Corporate Tax Ex. CT 100%
MDD 0.96 0.93 2.26 0.86 90%
GDP 1.08 1.03 1.33 1.05 80%
70%
30% 60%
20% 50%
10% 40%
0%
-10% 30%
-20% Half of CT, PAYE, VAT 20%
-30% 10%
-40% comes from five least
-50% impacted sectors* 0%
-60% VAT PAYE CT Three taxes
Industry (excl.
Information and
Financial and Insurance
Public Admin, Education
Agriculture, Forestry and
Real Estate Activities
Construction
Professional, Admin and
Distribution, Transport,
Arts, Entertainment and
Hotels and Restaurants
Communication
Construction)
combined
Support Services
Other Services
Other Sectors
and Health
Activities
Fishing
Financial and Insurance
Admin + support (incl. Aircraft Leasing)
ICT (tech sector)
% of CT, PAYE, VAT y-o-y change in GVA (2020) Manufacturing (incl. Pharma)
Source: CSO, Revenue, NTMA Calculations
* Agriculture sector pays minimal tax 50
Elasticity based on 1995-2019 data.
E = (annual % change in tax)/(annual % change in growth variable)OECD’s BEPS 2.0 process could impact the business tax
landscape globally – agreement may come in mid-2021
Pillar One : proposal to re-allocate taxing Pillar Two: proposal for minimum global tax
rights on non-routine profits
• The OECD has proposed further corporate tax • Pillar Two - the basic idea is to introduce a
reform - a BEPS 2.0. minimum effective tax rate with the aim of
reducing incentives to shift profits.
• BEPS 2.0 looks at two pillars. The first pillar
focuses on proposals that would re-allocate taxing • Where income is not taxed to the minimum level,
rights between jurisdictions where assets are held there would an “income inclusion rule” which
and the markets where user/consumers are operates as a ‘top-up’ to achieve the minimum
based. Non-routine profits could - to some - rate of tax.
degree be taxed where customers reside.
• The obvious questions arise:
• Under such a proposal, a proportion of profits what is the appropriate minimum tax rate?
would be re- allocated from small countries to who will get the ‘top-up’ payment?
large countries. Such a proposal would probably Is the minimum rate taxed at a global (firm)
reduce Ireland’s corporation tax base. Some level or on a country-by-country basis?
estimates place the hit at 5-15% per annum.
• These questions are as yet unanswered. If the
• Nothing has been decided yet. There are minimum rate agreed is greater than the 12.5%
disagreements across countries. Some optimism rate that Ireland levies, it might erode this
for reform after recent moves by US. country’s comparative advantage.
51Outside of sector makeup, Ireland’s population helps
growth potential: Age profile younger than the EU average
Ireland’s population estimated at 4.98m in Ireland’s population will remain younger
2020: younger population than EU than most of its EA counterparts
70% Japan
Greece
60% Portugal
Italy
Spain
50%
Germany
Finland
40% France
Denmark
30% Ireland
UK
Belgium
20% China
Canada
10% Sweden
USA
World
0%Migration has improved Ireland’s human capital; post-
Covid migration to be closer to zero given travel bans
Latest Census data show net migration Migration inflow particularly strong in highly
positive since 2015 – mirroring economy educated cohort – work in MNCs attractive
150 3.0% 120
100 2.0% 90
60
50 1.0%
30
0 0.0%
0
-50 -1.0%
-30
-100 -2.0%
-60
2003
1987
1989
1991
1993
1995
1997
1999
2001
2005
2007
2009
2011
2013
2015
2017
2019
-90
Emigration (000s)
Immigration (000s) -120
Net Migration (000s) Third level Other Education Net Migration
Net Migration (% of Pop, RHS) 2009-2013 2015-2019
53
Source: CSOIncome equality has improved: Ireland’s progressive
system the main driver and cushioned the economy in 2020
Lower inequality (1985-2015): economic rise Progressive system means Ireland is around
reduced GINI coefficient unlike others the OECD average for GINI after tax
0.06 0.8
Lower GINI score means more
0.7
0.04 equal society
0.6
0.02 0.5
0.4
-
0.3
(0.02) 0.2
(0.04) 0.1
0
Denmark
Belgium
France
Italy
Latvia
Greece
Norway
Sweden
Austria
Poland
USA
Chile
South Africa
Slovenia
Iceland
Estonia
Finland
Germany
Australia
Russia
Israel
UK
Mexico
Costa Rica
Canada
Ireland
Slovakia
Czech Rep
Lithuania
Hungary
Netherlands
Portugal
Japan
Luxembourg
Spain
Korea
Turkey
Switzerland
(0.06)
(0.08)
Italy
France
Denmark
Belgium
Norway
Sweden
Greece
USA
Finland
Austria
Germany
Ireland
UK
Japan
Portugal
Netherlands
Canada
Spain
Switzerland
Luxembourg
Pre Taxes and Transfers
GINI Coefficient (Post Taxes and Transfers)
Source: IMF, OECD 54Section 5: Brexit “Hard Brexit” risk eliminated by free trade agreement leaving smaller long term impact
Following intense negotiations, a Free Trade Agreement
was agreed in December 2020 allowing for tariff free trade
Main points of FTA
• From January 1, the UK becomes a “third country” outside the EU’s single market and customs union. As
such without a free trade agreement, trade would be subject to tariffs and quotas.
• Under the deal, goods trade between the two blocs will remain free of tariffs.
However, goods moving between the UK and the EU will be subject to customs and other controls, and
extra paperwork is expected to cause disruptions.
Due to these non-tariff barriers, Brexit will likely result in less trade.
• Under the deal, services trade between the two blocs will continue but again could be hampered.
The Agreement provides for a significant level of openness for trade in services and investment.
But providing services could be hampered. For example, UK service suppliers no longer have a
“passporting” right, something crucial for financial services. They may need to establish themselves in
the EU to continue operating.
• The deal means less cooperation in certain areas compared to before Brexit. Financial and business services
are only included to a small extent. Cooperation on foreign policy, security and defence will be lower also.
• Brexit is likely to result in less trade in the long run between the EU and the UK but the deal does avoid the
worst case scenarios: Hard Brexit has been averted and the economic impact to Ireland will be modest.Impact of Brexit on Ireland will be net negative but deal
means the shock is smaller and spread over long horizon
Modelled impact on output versus No Brexit IE trading partners: UK important for good
baseline: FTA reduces impact significantly imports (land bridge) & services exports
0 % of Goods Services Total
total (2019) (2019) (2019)
-1 Exp. Imp. Exp. Imp. Exp. Imp.
-2 US 30.8 15.5 15.8 18.6 21.9 17.9
-3 UK
8.9 20.6 15.8 6.9 13.5 10.6
(ex NI)
-4
NI 1.4 1.9 n/a n/a n/a n/a
-5
EU-27 37.1 36.7 29.8 19.8 32.8 23.8
-6
China 5.9 5.8 2.8 1.3 4.0 2.3
-7
2020 2021 2022 2023 2024 2025
Other 15.9 19.4 35.9 53.4 27.8 45.5
FTA WTO Disorderly No-Deal
57
Source: CBI, NTMA analysisImports more affected than exports in January by new
trading arrangements
In Jan. imports from UK fell 65% - over last UK exit from single market will continue
three months only 10% - suggests stockpiling trend of lower goods trade between IE & UK
50% 60%
40%
30% 50%
20%
40% Down 10%
10% since Brexit
0% vote
30%
-10%
-20%
20%
-30%
-40% 10%
-50%
-60% 0%
2017
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2012
2013
2014
2015
2016
2018
2019
2020
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
2019
Exports to UK (3 month y-o-y change) % of Irish agri exports going to UK
Imports from UK (3 month y-o-y change) % of other Irish goods exports going to UK
58
Source: CSOOne possible offset to Brexit impact is FDI inflows into IE;
service suppliers in UK may need to re-establish in EU
FDI: Ireland benefitting already Companies that have indicated jobs have or
will be moved to Ireland
Ireland could be a beneficiary from displaced FDI.
The chief areas of interest are
Financial services
Business services
IT/ new media.
Dublin is primarily competing with Frankfurt,
Paris, Luxembourg and Amsterdam for financial
services.
The UK (City of London) has lost significant
degree of access to EU market so there may be
more opportunities in time.
2019 figures from the IDA have shown that at
least 70 investments into Ireland have been
approved since the announcement of Brexit.
59Withdrawal Agreement in 2019 solves Northern Ireland
border issues
Main points of Withdrawal Agreement
• The withdrawal agreement is a legally binding international treaty which works in tandem with the free
trade agreement.
• Northern Ireland will remain within the UK Customs Union but will abide by EU Customs Union rules –
dual membership for NI.
• No hard border on the island of Ireland: the customs border will be in the Irish sea. Goods crossing
from Republic of Ireland to Northern Ireland will not require checks, but goods that are continuing on
to the UK mainland will.
• Complex arrangements will be necessary to differentiate between goods going to NI and those
travelling through NI to UK or vice versa. Customs checks at ports, VAT and tariff rebates and alignment
of regulations will be needed.
• All of this is backed by a layered consent mechanism, which allows Stormont to opt-out under simple
majority at certain times.
60Section 6: Property Property market in 2020 showed fewer transactions, completions; prices less affected
House prices had plateaued before the virus arrived;
Covid price impact minimal but Dec/Jan saw increase
House prices stabilized 20% below their Mortgage approvals increasing but
peak (100 in 2007) transactions still down
120 Level
Sep Oct Nov Dec Jan
(y-o-y % change)
100
4,227 5,463 4,007 7,361 3,091
80 # of transactions
(-17.2%) (-1.8%) (-38%) (+9%) (-13%)
60 4,621 5,207 4,336 3,247 3,355
# of mortgage
approvals
40 (20.8%) (15.4%) (29%) (36%) (2.8%)
20 134.7 135.5 136.0 137.2 137.9
Residential Property
Price Index
(-0.9%) (-0.4%) (1%) (2.2%) (2.6%)
0
2017
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
114.6 114.0 114.0 114.4 114.8
Private Rent Index
National Excl. Dublin Dublin (-2.6%) (-3.2%) (-3%) (-2.9%) (-2.5%)
Source: CSO; BPFI, PPR, Department of Housing 62Medium-term driver - Housing supply still below demand;
supply was catching up before Covid-19
12
Average annual New Dwelling
10 housing demand Completions (last four
(2020-2030) quarters)
Thousands of housing units
8
State 33.6 19.7
6 GDA 17.2 10.5
Ex-GDA 16.5 9.2
4
• Greater Dublin Area (Dublin + Mid East)
2
requires the majority of needed dwellings.
0
• On average, 9,200 housing units are
demanded a year in the regions that are
not currently funded by markets.
Average annual housing demand (2020-2030)
New Dwelling Completions (last four quarters)
Source: CSO; NTMA analysis 63Covid-19 has impacted supply for 2020 and 2021
Housing supply picked up pre-Covid:
Housing Completions* close to 25,000 in
coronavirus to hamper supply for 2020/21
2020; 20,000+ in new dwelling completions
30000 30000
25000 25000
20000
20000
15000
15000
10000
10000
5000
5000
0
2015 2016 2017 2018 2019 2020 0
New dwelling completion Unfinished 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021
Reconnection Non-Domestic Starts (advanced 12 months)
All connections Completions (new dwellings)
Source: DoHPCLG, CSO, NTMA Calculations
* Housing completions derived from electrical grid connection data for a property. Reconnections of 64
old houses or connections from “ghost estates” overstate the annual run rate of new building.
**2020 completions forecasted down 20% on 2019Transactions falling off given Covid restrictions – but
prices may still rise with limited supply
Mortgage drawdowns (000s) rose from Non-mortgage transactions still important;
deep trough before Covid-19 impact transactions hit in Q2/Q3 but rebound in Q4
120 20 80.0%
Thousands
18 70.0%
100 16
60.0%
14
80
12 50.0%
60 10 40.0%
8 30.0%
40
6
20.0%
20 4
2 10.0%
0
0 0.0%
2006 2008 2010 2012 2014 2016 2018 2020
Q2 2011
Q2 2018
Q4 2010
Q4 2011
Q2 2012
Q4 2012
Q2 2013
Q4 2013
Q2 2014
Q4 2014
Q2 2015
Q4 2015
Q2 2016
Q4 2016
Q2 2017
Q4 2017
Q4 2018
Q2 2019
Q4 2019
Q2 2020
Q4 2020
Residential Investment Letting
Mover purchaser Non-mortgage transactions
Mortgage drawdowns for house purchase
First Time Buyers Non-mortgage transactions % of total (RHS)
Source: BPFI (4 quarter sum used) Source: BPFI; Residential Property Price Register
65Covid-19 impact on prices muted as both supply and
demand impacted, but rents have come off highs
House prices up compared to January 2020 Rents are well above previous peak but have
suggesting demand un-impacted by Covid fallen in recent months
30% 180
160 Rents now well
20% above prices
140
10% 120
100
0%
80
-10% Prices were
60 above rents
-20% 40
20
-30%
0
2005 2007 2009 2011 2013 2015 2017 2019
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
National (Y-o-Y %) Ex Dublin (Y-o-Y %)
Dublin (Y-o-Y %) Rents (100 = 2005) Price
Source: CSO; RTB 66Irish house price valuation metrics remained well below
2008 levels throughout last cycle
Deviation from average price-to-income ratio (Q2 2020, red dot represent Q1 2008)
60%
40%
20%
0%
-20%
BG SD OE NL LX NW DN FR ES IE PT EA UK BD GR FN IT
Deviation from average price-to-rent ratio (Q2 2020, red dot represent Q1 2008)
100%
80%
60%
40%
20%
0%
-20%
SD NW BG UK LX FR DN ES NL IE OE FN EA BD PT GR IT
Source: OECD, NTMA Workings 67
Note: Measured as % over or under valuation relative to long term averages since 1980.Section 7: Banks & other Ireland’s banks among best capitalised in Europe – complete reverse of late 2000s
Ireland’s pillar banks in relative good shape to weather
Covid-19 storm
• Banks profitable before Covid-19: income, cost and balance sheet metrics much improved.
• Interest rates on mortgages and to SMEs are still high compared to EU thanks to legacy issues and the
slow judicial process in accessing collateral.
• An IPO of AIB stock (28.8%) occurred in June 2017. This returned c. €3.4bn to the Irish Exchequer: used
for debt reduction. Further disposal of banking assets unlikely in the short term given low valuations
• Ulster Bank (no govt. ownership) has decided to leave Irish banking market. Reduced competition is
main impact. Ulster Bank’s loans and deposits may be taken on by other institutions in market.
Net Interest Margin Profit before Tax
3.0% 1.5
2.5% 1
2.0% 0.5
1.5%
0
1.0% AIB BOI PTSB
-0.5
0.5%
-1
0.0%
AIB BOI PTSB -1.5
2017 2018 2019 2020 2017 2018 2019 2020
69
Source: Annual reports of banks - BOI, AIB, PTSBIreland’s banks are among the best capitalised in Europe
12
Estonia
Leverage Ratio (fully phased-in definition )
11
10
IE
9
Greece
Cyprus
8
Lithuania
7 MT
LX
Italy
6 Spain
FR
5
Germany
4
10 12 14 16 18 20 22 24 26 28 30
Common equity Tier 1 ratio [%]
Source: ECB consolidated banking data (Q3 2020)
Note: Leverage Ratio = Tier 1 capital/Total leverage exposure; CET1 = Common tier 1 capital/total risk 70
exposures. “Fully loaded” refers to the actual Basel III basis for CET1 ratios.Capital ratios strengthened as banks shrunk and
consolidated in last ten years
CET 1 capital ratios allow for amble Loan-to-deposit ratios have fallen
forbearance in 2020 significantly as loan books were slashed
20% 200
18% 180
160
16%
140
14%
120
12% 100
10% 80
17.3% 60
8% 15.6% 15.1%
13.8% 14.6% 13.4% 40
6%
20
4%
-
2% Loan-to- Loans (€bn) Loan-to- Loans (€bn)
Deposit % Deposit %
0%
CET1 % (Dec 2019) CET1 % (Dec 2020) AIB BOI
AIB BOI PTSB Dec-10 Dec-20
Source: Published bank accounts Source: Published bank accounts
Note:
71
“Fully loaded” CET1 ratios used. Refers to the actual Basel III basis for CET1 ratios.Domestic bank cost base has risen due to Covid
Cost income ratios increased … IE banks just below EU average in cost/income
90.0%
150% 144% 80.0%
70.0%
123% 60.0%
125%
50.0%
40.0%
100% 30.0%
88%
20.0%
75%
75% 10.0%
64% 64%
0.0%
NO
GR
GB
EU
EE
ES
HR
HU
IS
NL
LT
PL
IE
LV
FI
PT
LU
SK
SI
DK
CY*
IT
FR
RO
AT
MT
DE
CZ
SE
BG
BE
50%
Staffing (000s) halved post crisis
30
25%
20 26
0% 16
10
AIB BOI PTSB 9 10
5 2
2012 2013 2014 2015 2016 0
AIB BOI PTSB
2017 2018 2019 2020
2008 2020
Source: Annual reports of Irish domestic banks, EBA 72
* EBA data includes three domestic banks as well as Ulster Bank, DEPFA & Citibank.Mortgage arrears have not reversed course yet but we will
know more on asset quality when economy re-opens
Mortgage arrears (90+ days) Repossessions*
20% 12.0 3500 6.0%
18% 10.0
3000 5.0%
16% 8.0
PDH Arrears 2500
6.0 (by thousands)
14% 4.0%
4.0
12% 2000
2.0 3.0%
10%
0.0 1500
8% 2.0%
-2.0 1000
6%
-4.0
4% 500 1.0%
-6.0
2% -8.0 0 0.0%
0% 10 11 12 13 14 15 16 17 18 19 20 13 14 15 16 17 18 19 20
10 11 12 13 14 15 16 17 18 19 20 Over 90 days 90-180 days
181-360 days 361-720 days PDH BTL % of MA90+ (RHS)
PDH + BTL (by balance)
>720 days Total change
PDH + BTL (by number)
Source: CBI
* Four quarter sum of repossessions. Includes voluntary/abandoned dwellings as well as court ordered 73
repossessionsThe European Commission’s ruling on Apple annulled in
court; further appeal by EC means case continues
• Back in 2016, the EC had ruled that Ireland illegally provided State aid of up to €13bn, plus interest to
Apple. This figure is based on the tax foregone as a result of a historic provision in Ireland’s tax code.
The Irish Government closed this provision on December 31st 2014.
• Apple appealed the ruling, as did the Irish Government. The General Court granted the appeal in July,
annulling the EC’s ruling.
• This case had nothing to do with Ireland’s corporate tax rate. It related to whether Ireland gave unfair
advantage to Apple with its tax dealings. The General Court has judged no such advantage occurred.
• The Commission has decided to appeal to a higher court: the European Court of Justice. This process
could still be lengthy. Pending the outcome of the second appeal, the €13bn plus EU interest will
remain in an escrow fund.
• The NTMA has made no allowance for these funds in any of its planning throughout the whole
process. There is no need to adjust funding plans given the decision by the General Court in July or by
the Commission’s decision to appeal.
74Disclaimer
The information in this presentation is issued by the National Treasury Management Agency (NTMA) for
informational purposes. The contents of the presentation do not constitute investment advice and should
not be read as such. The presentation does not constitute and is not an invitation or offer to buy or sell
securities.
The NTMA makes no warranty, express or implied, nor assumes any liability or responsibility for the accuracy,
correctness, completeness, availability, fitness for purpose or use of any information that is available in this
presentation nor represents that its use would not infringe other proprietary rights. The information
contained in this presentation speaks only as of the particular date or dates included in the accompanying
slides. The NTMA undertakes no obligation to, and disclaims any duty to, update any of the information
provided. Nothing contained in this presentation is, or may be relied on as a promise or representation (past
or future) of the Irish State or the NTMA.
The contents of this presentation should not be construed as legal, business or tax advice.
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