Ireland: Lockdown restrictions easing in Q2 - Vaccines, household savings and external environment give optimism for recovery from H2 onwards ...
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Ireland: Lockdown restrictions easing in Q2 Vaccines, household savings and external environment give optimism for recovery from H2 onwards May 2021
Index
Page 3: Summary
Page 8: Macro
Page 22: Fiscal
Page 32: NTMA Funding
Page 46: 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; re-opening
in Q2 before vaccine rollout underpins H2 recovery
GDP remained positive in 2020 Unemployment to unwind as Value added from ICT & pharma
but domestic sectors hit economy begins to open has given Ireland resilience
35% 200.0
700 180.0
30%
25% 600 160.0
20% 140.0
500
15% 120.0
400 100.0
10%
80.0
5% 300
60.0
0%
200 40.0
-5%
20.0
-10% 100
0.0
-15%
2008
2010
2012
2014
1996
1998
2000
2002
2004
2006
2016
2018
0
-20%
Jul-20
Apr-20
Nov-20
Jan-20
Jan-21
Apr-21
Feb-20
Mar-20
Aug-20
Sep-20
Feb-21
Mar-21
Jun-20
May-20
Oct-20
Dec-20
2005
2007
2010
2012
2015
2017
2020
GVA: Multinational dominated
sectors (€bns)
Domestic Demand GDP Unemployment claimants
GVA: Domestic sectors
(Index, Jan 20 = 100)
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
10 180%
160%
5 Debt-to-GNI*
(106% 2020f; 95% in 2019) 140%
0
120%
-5 Debt-to-GG Revenue 100%
(254% 2020; 229% in 2019) 80%
-10
60%
-15 Average interest rate
40%
(1.8% 2020, from 2.2% in 2019)
-20 20%
Debt-to-GDP 0%
-25 1995 2000 2005 2010 2015 2020
1995 2000 2005 2010 2015 2020
(60% 2020, 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.
Medium term economic challenges - Covid recovery, deficit
reduction and possible OECD tax reform
Recovery Policy Tax
Ireland under strict lockdown in Significant stimulus announced Proposed corporate tax reform
early 2021. But restrictions are equivalent to 19% of GNI* over led by the OECD may impact
easing and vaccine rollout 2020 and 2021 Ireland's growth model
underway
Deficits are necessary but in Global minimum tax rate hits at
Current lockdown will impact time public support to Ireland’s FDI proposition to
H1 growth before recovery can economy to be reduced multinationals, possibly
begin in H2 reducing future growth
6
NTMA has indicated a funding plan of €16 - €20bn for 2021
€12bn 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
7
Section 1: Macro Domestic economy hit hard by restrictions but resilience shown in income, tax and exports data
Cautious re-opening underway in Q2, schools/construction
were back in April, retail in May, hospitality set for June
14 day cumulative Covid-19 cases/deaths Ireland case numbers versus other countries
per 100k of population (per 100k of population)
1,400 25 1,600
2021
lockdown 1,400
1,200
20 1,200
1,000 1,000
15 800
800
600
600
10 400
400 200
5 -
200
Apr-20
Jul-20
Nov-20
Jan-21
Apr-21
Mar-20
Aug-20
Sep-20
Feb-21
Mar-21
Dec-20
Jun-20
Oct-20
May-20
May-21
- -
Ireland France Germany
Italy Spain US
Cases Deaths (RHS) UK
Source: DataStream 9
Vaccine rollout accelerating – c. 35% with one dose in
mid-May
Rollout has shifted gears in recent weeks Ireland unlikely to have issues regarding
vaccine hesitancy
90% 100
Government target of 90
80%
80% with one dose 80
70% by end Q2 70
60% 60
50
50%
40
40% 30
30% 20
10
20%
0
Sweden
Lithuania
Italy
France
Latvia
Denmark
Belgium
Greece
Cyprus
Estonia
Finland
Austria
Bulgaria
Germany
Poland
Croatia
Slovakia
Slovenia
Ireland
Portugal
Netherlands
Hungary
Spain
EU 27
Romania
Czechia
10%
0%
01/21 02/21 03/21 04/21 05/21 06/21
% of adult population with one dose % intending to take vaccine
Source: DataStream, Eurofound Survey 10The effects of 2021 lockdown are evident but not as severe
as the initial Covid lockdown
Those on government supports Spending fell in Q1 but PMIs have recovered quicker
well below levels seen in Q2 2020 recovering (base effect Apr.) this time around
1.2 70
50%
Millions
2021
lockdown 40% 60
1
30% 50
0.8 20% 40
10%
0.6 30
0%
0.4 2020 Q2 20
-10%
lockdown
-20% 10
0.2
-30% 0
Jul-19
Apr-18
Apr-19
Apr-20
Apr-21
Jan-18
Jul-18
Jan-19
Jan-20
Jul-20
Jan-21
Oct-18
Oct-19
Oct-20
0 -40%
Apr-20
Jul-20
Nov-20
Jan-21
Apr-21
Mar-20
Aug-20
Sep-20
Feb-21
Mar-21
Dec-20
May-20
Jun-20
Oct-20
Nov-20
Mar-21
Jan-20
Feb-20
Apr-20
May-20
Jul-20
Sep-20
Jan-21
Feb-21
Apr-21
Mar-20
Aug-20
Dec-20
Jun-20
Oct-20 Services
Number of people on income Spending on debit and credit cards Manufacturing
support schemes (y-o-y change) Composite
Source: CSO, Department of Social Protection, Revenue, CBI, Markit 11On 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 24.2%* in March 2020; MDD fall smaller due to productivity mix
35 2.5
Millions
30
2
25
1.5
20
14.7
15 1
10 Those “Away from Work” increased
0.5
on average by 175k in 2020 -
5 impacted heavily by Covid
5.2
0
0 2018 2019 2020
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Away from work' (employed but not working)
Unemployment Unemployment
Covid-19 Adjusted Unemployment Employment (those at work)
Source: CSO
* The CSO have estimated this as the upper bound of the unemployment rate. The CSO have urged
caution around labour market data given the likelihood of revisions and the unique nature of 14
employment status for some people in the pandemic.Approx. 700k on income support as lockdown continues
to ease; schemes maintain aggregate household income
Those on the PUP and EWSS falling Supports mean disposable income grew in
gradually since worst of lockdown in Q1 2020 similar more to US than EU
1.2 10%
Millions
1 8%
0.8 6%
0.6 4%
0.4 2%
0.2 0%
0 -2%
March
January
March
June
September
December
August
April
July
May
October
November
February
April
-4%
France
Italy
Belgium
Denmark
Greece
Australia
US
Germany
UK
Austria
Ireland
Netherlands
Portugal
EA-19
Canada
EU-27
Spain
Temporary Wage Subsidy Scheme/Employment Wage
Subsidy Scheme
Pandemic Unemployment Payment Gross Disposable Household Income (y-o-y change 2020)
Source: Revenue, DEASP, CSO, Revenue 15Consumption fell sharply in 2020 – down 9% 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% y-o-y and out of lockdown
30 20% 40% 2020Q2 2021
lockdown lockdown
15% 20%
25
10%
0%
20 5%
-20%
0%
15 -40%
-5%
10 -10% -60%
-15% -80%
5
-20% -100%
2019M01
2019M03
2019M05
2019M07
2019M09
2019M11
2020M01
2020M03
2020M05
2020M07
2020M09
2020M11
2021M01
2021M03
0 -25%
Consumption Growth (Y-o-Y, RHS) All Retail Food Retail
Consumption (€bns, LHS) Bars Department Stores
Source: CSO
16Household balance sheets: 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
25 400%
350%
% of Disposable Income (4Q MA)
20
300%
250%
15
200%
10 150%
100%
5
50%
0%
0
Public and Private Private debt (% of Public debt (% of
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
debt (% of GNI*) GNI*) GNI*)
Ireland EA-19 UK
2003 2008 2013 2020e
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 starting 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
Oil price Rising
despite rebound -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 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
R² = 0.8
Nominal COE growth per head*
4.0 8.0%
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%
2000
1997
1998
1999
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
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)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 effective
rights on non-routine profits global tax rate
• 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 a ‘top-up’ to achieve the minimum
and the markets where user/consumers are rate of tax. It is possible this could be done
based. country-by-country.
• Under such a proposal, a proportion of profits • The obvious questions arise:
would be re-allocated from small countries to what is the appropriate minimum tax rate?
large countries. Pillar 1 would probably reduce who will get the ‘top-up’ payment?
Ireland’s corporation tax base. Some estimates
place the hit at 5-15% per annum. • These questions are as yet unanswered. If the
minimum rate agreed is greater than the 12.5%
• Nothing has been decided yet. There are rate that Ireland levies, it might erode Ireland’s
disagreements across countries. Recent moves by comparative advantage in attracting FDI.
US have given fresh impetus.
• Ireland could need to lean on other positives;
talented workforce, English speaking, EU access,
21
ease of doing businessSection 2: Fiscal Revenues have held up well with deficit expansion mainly spending related
Fiscal policy response to Covid has been swift
Large deficit expected in 2021 similar to 2020
Response Revenues Debt
Total fiscal response of €38bn Ireland’s economic structure has Debt ratios have reversed 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 106% for end-2020
23Ireland fiscal response (c. €38bn, 19% of GNI*) highly
skewed to direct supports unlike others in EU
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
Norway
Sweden
Denmark
Belgium
France
Finland
Australia
IE (GNI*)
Singapore
USA
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 guaranteesThe fiscal response to Covid is opposite of the GFC –
interest bill won’t balloon and investment set to increase
After global financial crisis, Ireland cut capital …now revenues are more resilient, spending
spending, paid more interest as taxes fell… (incl. inv.) increases, interest bill unchanged
25 25
€bns
€bns
20 20
15 15
GG Capital
10 expenditure 10
5 GG Interest 5
Costs
0 GG Expenditure 0
(underlying)
-5 GG Revenue -5
-10 -10
-15 -15
-20 -20
2007 2008 2009 2010 2011 2012 2013 2019 2020 2021f 2022f 2023f 2024f 2025f
Source: CSO, Department of Finance forecasts 25
Charts represent the change in billions for selected fiscal variables versus 2007/2019 levels.
Underlying GG expenditure numbers used (excludes banking recapitalisations)After Covid-19 stimulus, 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% 25%
20%
5%
15%
0% 10%
5%
-5%
0%
-10% -5%
-10%
-15% 2020
GGB % of GDP -5% -15%
GGB % of GNI* -9%
-20%
-20%
2020 vs 2019
2021f
2023f
2025f
2009
1995
1997
1999
2001
2003
2005
2007
2011
2013
2015
2017
2019
Income tax VAT Excise duties
GG Balance (% GNI*) Primary Balance (% GNI*) Corporation tax GG Revenue GG Expenditure
Source: CSO; Department of Finance 26
^ Underlying GG and primary balance numbers used (excludes banking recapitalisations)Gross Government debt c. 60% of GDP at end-2020 but
close to 106% of GNI*
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
1995 1999 2003 2007 2011 2015 2019 2023f
Debt to GNI* Debt to GDP
Source: CSO; Department of Finance, NTMA analysis 27Low 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 defensive nature of Pharma and
ICT; income tax protected by nature of shock
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
1995
1997
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
29NTMA’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
-30 EBR -12.3 -16.9
This is the deficit in cash terms that the
NTMA must finance each year
Prom. Note capital
Accruals can relate to interest, taxes, other
-40 transfer to recap Adjust for Accruals 1.6 1.9 expenditures
banks hit GGB in
Transactions between the Exchequer and
2010 but not EBR Exclude Equity &
-50 -2.4 -0.3 NAMA, CBI and other govt. entities: this
(non-cash Loan Transactions benefits funding req.
expenditure)
Archaic funding structure of social insurance
Social Insurance
-60 -3.5 -0.6 in Ireland is outside Exchequer. Consolidated
Fund in GGB
Semi State, ISIF, Dividends and profits from government
-1.5 -0.9 entities
other funds
GG Balance EBR Local Govt. -0.4 -1.3 Local governments fund themselves
Most complete metric for fiscal position.
GGB -18.4 -18.1 Use this for deficit comparison with other
Source: CSO, nations 30
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 254.4% 4.3% 59.5%
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, Irish numbers are actual outturn
Ireland 105.6% Debt to GNI* ratio in 2020 (SPU 2021 Forecast) 31Section 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
€12bn 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
33Flexibility 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. SURE)
Source: NTMA
34Near-term redemptions much lower than last four years;
lower borrowing costs also provides NTMA with flexibility
NTMA issued €104.5bn MLT debt since 2015; Even with extra Covid-19 borrowings, NTMA
13.4 yr. weighted maturity; avg. rate 0.75% might not match supply in 2017-2020 period
7.0 27 80
€ Billions
24
6.0 70
5.5 21
5.0 60
18
3.9
4.0 15
7Y 50
2.8 10Y 12
3.0 10Y 10Y 15Y 40
12Y 12Y 9
2.0 1.5 10Y
15Y 30Y
20Y 6 30
0.8 0.9 1.1 0.9
1.0 5Y 5Y 10Y 7Y 5Y 0.2 3
8Y 10Y 16Y 30Y 10Y 20Y 0.1 20
0.0 0
2012201320142015201620172018201920202021 10
YTD
Auction
0
Syndication Issuance (2017-20) Redemptions + est. EBR
Weighted Average Yield % (LHS) (2021-25)
Source: NTMA, Department of Finance 35
LHS chart 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 11.2 10.8 10.6
8 4 8.0 7.8 7.8 7.5 7.1 7.0 6.9 6.7
6
2
4
2 0
IR BG AT ES FR DK NL 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 36
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
bilateral loan matured in Q1 2021. Other: 1.5
€20 Other: 4.6 Sure: 2.5
• The Exchequer Borrowing Requirement (EBR) for UK Bilateral:
2020 was lower than expected at €12.3bn. €16
0.5
• Thus, NTMA entered 2021 with a larger cash
balance of €17.4bn. €12
Bond
• NTMA has received monies from the EU SURE issuance:
€8 EBR: 16.9
scheme. It is a diversified source of funding in 18.3
2021 (c. €2.5bn).
€4
• End year cash balances are currently forecasted at
levels close to end-2020.
€-
Source: NTMA
Funding Requirements (€bn) Sources of Funding (€bn)
Notes:
Rounding may affect totals as some figures have been rounded up to the nearest €bn.
1. The NTMA bond funding range for 2021 is €16-€20bn. While €18bn is reflected as an indicative
estimate in the chart, it also includes cash proceeds from issuance undertaken to end-April.
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 an
37
Emergency.
5. EBR is the Department of Finance (April SPU) 2021 estimate of the Exchequer Borrowing Requirement
.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
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 2021
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 38
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
11% IGBs -
Private 0
2010
2017
2007
2008
2009
2011
2012
2013
2014
2015
2016
2018
2019
2020
Eurosystem Resident
22% Short term 6%
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- 39
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
10.0% 8.8%
14.6%
11.8% 31.6%
24.0%
42.4% 7.2%
46.6%
Fund/Asset Manager Banks/Central Banks* Ireland UK
US and Canada Continental Europe
Pensions/Insurance Other Nordics Asia & Other
Source: NTMA 40
* 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
41Allocation 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
42Irish 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
43
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
44Ireland 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
45
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 47Sizeable 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 48Ireland 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
50
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 51
Elasticity based on 1995-2019 data.
E = (annual % change in tax)/(annual % change in growth variable)Outside 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 more
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 early 2021 by new
trading arrangements
In Jan. and Feb imports from UK fell sharply UK exit from single market will continue
amid strong stock-piling pre-Brexit 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%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2012
2013
2014
2015
2016
2017
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 Signs of price increases amid delays in new house building
House prices had plateaued before the virus arrived;
Covid price impact minimal but early 2021 saw increase
House prices are 15-20% off previous peak Transactions returning after Covid impact
and will improve as year progresses
120 70000 50%
60000 40%
100
30%
50000
80 20%
40000
10%
60
30000
0%
40 20000
-10%
10000 -20%
20
0 -30%
Q1 2011
Q4 2011
Q3 2012
Q2 2013
Q1 2014
Q4 2014
Q3 2015
Q2 2016
Q1 2017
Q4 2017
Q3 2018
Q2 2019
Q1 2020
Q4 2020
0
2010
2005
2006
2007
2008
2009
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
National Excl. Dublin Dublin 4Q Sum of Transactions Y-o-Y Change (RHS)
Source: CSO; BPFI, PPR, Department of Housing 62Covid-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 2020-22
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 2018 2019 2020 2021 2022
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 63
old houses or connections from “ghost estates” overstate the annual run rate of new building.
**2021 completions forecasted down 10-20% on 2020Medium-term driver - Housing supply still below demand;
supply was catching up before Covid-19
12
Average annual New Dwelling
Thousands of housing units
10 housing demand Completions (last four
(2020-2030) quarters)
8
6 State 33.6 19.7
4
GDA 17.2 10.5
2
Ex-GDA 16.5 9.2
0
• Greater Dublin Area (Dublin + Mid East)
requires the majority of needed dwellings.
Average annual housing demand (2020-2030)
New Dwelling Completions (last four quarters)
Source: CSO; NTMA analysis 64Transactions falling off given Covid restrictions
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%
4
20
2 10.0%
0 0 0.0%
Q4 2010
Q2 2011
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
Q2 2018
Q4 2018
Q2 2019
Q4 2019
Q2 2020
Q4 2020
2006 2008 2010 2012 2014 2016 2018 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 3.7% in the year to March Rents pressures returning - more so in the
2021 regions rather than Dublin
30% 180
Rents now well
160 above prices
20%
140
10% 120
100
0%
80
Prices were
-10%
60 above rents
-20% 40
20
-30%
0
2005 2007 2009 2011 2013 2015 2017 2019
2015
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
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.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 72
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.
73Disclaimer
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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