Ireland: Recovery underway in Q2 - Consumption led recovery driven by vaccine rollout and resilience in incomes - National Treasury Management Agency
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Ireland: Recovery underway in Q2 Consumption led recovery driven by vaccine rollout and resilience in incomes July 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
Q1 lockdown hurt economic performance but rebound in Q2
as vaccines rollout meant restrictions were eased
GDP remained positive in Q1 Unemployment to unwind as Value added from ICT & pharma
2021 but domestic sectors hit economy opens up has given Ireland resilience
35% 700 200
30% 180
600
25% 160
20% 500 140
15% 120
400
100
10%
300 80
5%
60
0% 200
40
-5%
100 20
-10%
0
0
-15%
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Nov-20
Apr-21
Jan-21
Jan-20
Feb-20
Apr-20
May-20
Jul-20
Sep-20
Feb-21
May-21
Mar-20
Mar-21
Aug-20
Dec-20
Jun-20
-20% Oct-20
2015
2005
2007
2010
2012
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 ratio rise as large fiscal response needed;
Govt. looking to narrow deficit in coming years
Run of primary surpluses Debt position reversed in 2020 Debt fell from 166% to 95% of
before Covid induced deficit 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
Lockdown in Q1 gave way to an Significant stimulus announced Proposed corporate tax reform
easing of restrictions in Q2. equivalent to c. 20% of GNI* led by the OECD may impact
Vaccine rollout progressing well over 2020 and 2021 Ireland's growth model
Timely labour market and Deficits are necessary but in Global minimum tax rate hits at
spending data indicate recovery time public support to the Ireland’s FDI proposition to
is underway economy to be reduced multinationals, possibly
reducing future growth
6
NTMA has indicated a funding range of €16 - €20bn for
2021 €13.25bn already funded in H1
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 QE purchases have 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 and
Sure funding in Q1 cost Ireland’s fiscal response
7
Section 1: Macro Domestic economy beginning to re-open. Resilience shown in income, tax and spending data
Restrictions on retail and outdoor dining lifted in Q2 –
Delta variant has delayed next phase of re-opening
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
1,400
1,200
20 1,200
1,000 1,000
15 800
800
600
600
10 400
400 200
5 -
200
- -
Ireland France Germany
Italy Spain US
Cases Deaths (RHS) UK
Source: DataStream 9
Due to cyber security issues data on deaths in Ireland has been significantly delayed – at present
5,000 people have died due to the virus.
Vaccine rollout progressing well – c. 68% with one dose in
early July, c. 50% fully vaccinated
Rollout is progressing well - further Ireland unlikely to have issues regarding
progress is needed to combat Delta variant vaccine hesitancy
80% 100
90
70%
80
60% 70
60
50%
50
40% 40
30
30%
20
20% 10
0
Sweden
Lithuania
Italy
Cyprus
France
Latvia
Denmark
Belgium
Greece
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 10On a relative basis Ireland performed well since Covid
shock – though Q1 was impacted by lockdown measures
Real MDD down 5.6% since Covid shock – Real MDD down 5.3% Y-o-Y in Q1 2021
similar to EA average alone: Ireland’s stricter lockdown at play
0% 3%
2%
-2% 1%
0%
-4%
-1%
-6% -2%
-3%
-8% -4%
-5%
-10%
-6%
-12% -7%
Portugal
Denmark
Belgium
Ireland
EA-19
Japan
US
Sweden
France
UK
Finland
S Korea
Germany
Italy
NL
Austria
Switzerland
-8%
France
Italy
NL
Belgium
Sweden
Denmark
Finland
UK
US
S Korea
Austria
Germany
Ireland
Japan
Portugal
Switzerland
Impact on MDD from Covid shock (last five quarters vs
2019 level) Y-o-Y MDD impact (Q1 2021, constant prices)
Source: CSO, DataStream 11
Note: MDD for Ireland is modified for multinational activity by Ireland’s Central Statistics Office (CSO). For
other countries MDD = Domestic demand = Consumption + Government (current) spending + InvestmentDomestic sectors were hit most in Q1 2021 but signs of
strong recovery in spending data
GDP remained positive in Q1 2021 but In Q1, spending fell but recovering strongly:
domestic sectors down 5.3% y-o-y H1 spending similar to 2019 levels
35% 50%
30% 40%
25% 30%
20% 20%
15% 10%
10% 0%
5%
-10%
0%
-20%
-5%
-30%
-10%
-40%
-15%
-20%
2005
2021
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Spending on debit and credit cards (y-o-y change)
Domestic Demand GDP Spending on debit and credit cards (versus 2019 average)
Source: CSO, CBI 12
* Domestic demand series accounts for multinational activity and known as modified final domestic
demand (excludes inventories)Sector breakdown for Q1 2021 – Multinationals continue
strong performance, domestic side hit hard
40%
25%
17% Domestic sectors hit hard – a quarter of the
20% economy in these four categories
6%
0%
0%
0% -2%
-20% Two sectors least -15%
-19% -21%
impacted are
dominated by FDI
-40%
-60%
-68%
-80%
ICT Industry (incl. Real Estate Public Sector Fin and insur. Agri, fish Prof services Dist, Trans, Construction Arts,
pharma) Hotels & Rest. Entertainment
GVA Growth (2021 Q1, constant prices)
13
Source: CSOLabour market data shows stark Covid-19 impact
True unemployment rate is uncertain: Covid- 10% fall in actual hours worked per week in
19 adjusted rate 21.9%* in May 2020; MDD fall smaller due to productivity mix
35 90
30 80
21.9
77.4
25 70 75.2
70.0 68.7
20 60
50
15
40
10
30
5
7.8 20
0
10
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
0
Unemployment 2018 2019 2020 2021 Q1
Covid-19 Adjusted Unemployment
Actual hours worked per week (millions)
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. 550k on income support as lockdown continues
to ease
Those on the PUP has halved since start of Supports mean disposable income grew in
2021 but pace likely to slow 2020 more akin to US than EU
1.2 10%
Millions
1 8%
0.8 6%
4%
0.6
2%
0.4
0%
0.2
-2%
0
-4%
Apr-20
Sep-20
Feb-21
Jul-20
Nov-20
Jan-21
Apr-21
Mar-20
Aug-20
Mar-21
Dec-20
Jun-20
Oct-20
Jun-21
May-20
May-21
France
Italy
Belgium
Denmark
Greece
Australia
UK
US
Germany
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 in Q1– down 11.4% versus 2020 despite
incomes being maintained
Consumption hit in Retail sales numbers should start to rise
Q1 2021, down 11.4% from 2020 along with spending as economy re-opens
30 20% 100%
15% 80%
25 60%
10%
40%
20 5%
20%
0% 0%
15
-5% -20%
-40%
10 -10%
-60%
-15%
5 -80%
-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
16Investment hit as construction sector has moved in & out
of lockdown; closed in Q1 but open in Q2
Investment hit by Q1 lockdown but impact IP distortions less than in previous quarters-
more muted thanks to M+E investment
40% 200
180
30%
160 Four-quarter
20% sum (€bns)
140
10% 120
100
0%
80
-10%
60
-20% 40
20
-30%
0
2012
2018
1996
1998
2000
2002
2004
2006
2008
2010
2014
2016
2020
-40%
2010
2018
1997
1998
2000
2001
2003
2004
2006
2007
2009
2012
2013
2015
2016
2019
2021
Building Investment Other Domestic Investment
Investment Building & Construction Distortions (mainly IP) Modified GFCF
Investment ex B+C Total GFCF
Source: CSO; NTMA calculations 17Household 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
of forced savings – IE larger than most Government not private balance sheets
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*)
2003 2008 2013 2020e
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) 18
CBI quarterly financial accounts data used for household and CSO data for nominal government
liabilities.External environment supportive – the global economy is
rebounding 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; -20%
UK growth Rebound
Brexit unresolved 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
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
4 12.0%
Average nom. MDD
growth in 2014-19: 6%
3 10.0%
R² = 0.8
Nominal COE growth per head*
2 8.0%
1 6.0%
0 2020
4.0%
outlier
-1
2.0%
-2
0.0%
-3
-2.0%
-4
-4.0%
2020
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
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 agreement will change business tax globally –
Ireland broadly supportive but reservations remain on P2
Pillar One : proposal to re-allocate taxing Pillar Two: proposal for minimum effective
rights on non-routine profits global tax rate
• 130 countries have signed on for the BEPS 2.0 • Countries will introduce a minimum effective tax
two-pillar set of reforms. rate with the aim of reducing incentives to shift
profits. A rate of “at least 15%” has been muted.
• The first pillar focuses on proposals that would re-
allocate some taxing rights between jurisdictions • Where income is not taxed to the minimum level,
where companies reside and the markets where there would a ‘top-up’ to achieve the minimum
user/consumers are based. rate of tax.
• Under such a proposal, a proportion of profits • Ireland has reservations on the minimum tax rate
would be re-allocated from small countries to proposal. For now, Ireland has not joined the
large countries. consensus. Discussions are on-going and should
conclude in October.
• Pillar 1 would reduce Ireland’s corporation tax
base. Some estimates place the hit at up to 20% • If the minimum rate agreed is greater than the
per annum. 12.5% rate that Ireland levies, it erodes some of
Ireland’s comparative advantage in attracting FDI.
• Ireland has been fully supportive of Pillar One
despite the implied cost to the Exchequer. • Ireland could need to lean on other positives;
talented workforce, English speaking, EU access,
and ease of doing business
21Section 2: Fiscal Revenues resilient with deficit expansion mainly Covid 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 c.€40bn Ireland’s economic structure has Debt ratios have reversed due to
over 2020 and 2021 (20% 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 cushion impact on deficit and 106% for end-2020
23Ireland fiscal response (c. €40bn, 20% 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
Finland
Australia
IE (GNI*)
France
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 different to 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 strong in 2021 so far; income tax in
significant deficit in 2020/21^ particular is impressive given lockdown
10%
50%
CT receipts will likely
revert to c. 5-10%
5% 40% above 2019 level by
year-end
30%
0%
20%
-5%
10%
-10%
0%
-15% 2021f -10%
GGB % of GDP -4.7%
GGB % of GNI* -8.4%
-20%
-20%
2021 vs 2019 (H1)
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)
Corporate tax receipts outsized for now, will likely revert to c. 5-10% above 2019 level by year-endGross 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 2020, 51% 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
2020 GG debt to GG revenue % GG interest to GG rev % GG debt to GDP %
Greece 403.5% 5.9% 205.6%
Italy 326.0% 7.3% 155.8%
Portugal 312.4% 6.7% 133.6%
Cyprus 291.3% 5.3% 118.2%
Spain 290.4% 5.4% 120.0%
UK 259.8% 5.5% 102.1%
Ireland 254.4% 4.3% 59.5% (106% GNI*)
Belgium 225.6% 3.9% 114.1%
France 218.8% 2.5% 115.7%
EA19 213.5% 3.3% 100.0%
Slovenia 185.5% 3.7% 80.8%
EU28 177.2% 3.5% 79.4%
Austria 171.1% 2.7% 83.9%
Germany 148.8% 1.4% 69.8%
Slovakia 144.8% 3.0% 60.6%
Finland 135.0% 1.3% 69.2%
Netherlands 124.1% 1.6% 54.5%
Source: EU Commission
Ireland 105.6% Debt to GNI* ratio (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 range of €16 - €20bn for
2021 €13.25bn already funded in H1
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 have cushioned higher issuance
Even with extra Covid-19 borrowings, NTMA NTMA issued €105.75bn MLT debt since 2015;
might not match supply in 2017-2020 period 13.4 yr. weighted maturity; avg. rate 0.75%
80 7.0 27
€ Billions
24
70 6.0
5.5 21
60 5.0
18
3.9
4.0 15
50 7Y
2.8 10Y 12
3.0 10Y 10Y 15Y
40
12Y 12Y 9
2.0 1.5 10Y
15Y 30Y
30 20Y 6
0.8 0.9 1.1 0.9
1.0 5Y 5Y 10Y 7Y 5Y 0.2 3
20 8Y 10Y 16Y 30Y 10Y 20Y 0.1
0.0 0
10 2012201320142015201620172018201920202021
YTD
Auction
0
Issuance (2017-2020) Redemptions + est. EBR Syndication
(2021-25) Weighted Average Yield % (LHS)
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 long term Government debt … favourably to other EU countries
20 12
18
16 10
14
8
12
10 6
11.0 10.7 10.6
8
6 4 8.1 7.9 7.8 7.7 7.3 7.1 7.1 7.0
4
2
2
0 0
2015 2016 2017 2018 2019 2020 2021 AT BG IR ES FR DK NL FN IT BD PT
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
Note: Weighted maturity in LHS chart for Ireland includes Fixed rate benchmark bonds, FRNs, 36
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) is adding further support
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 55%; increasing further with ECB’s PEPP actions
Ireland historically split 80/20 on non- “Sticky” sources - official loans, Eurosystem,
resident versus resident holdings (Q4 2020) retail - make up over 55% of Irish debt
250
200
Other Debt
(incl.
IGBs - 150
Official)
Private Non
23%
Resident
32% 100
Retail,
Resident
11% 50
IGBs -
Private
Resident 0
2014
2007
2008
2009
2010
2011
2012
2013
2015
2016
2017
2018
2019
2020
Eurosystem 5%
25% Short term
4% 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 July 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 • 2020 Allocation Report and 2019 Impact
report to be released in Q3 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 (cont.)
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
*For a more detailed break-down please see the ISGB 2017/ 2018 Impact
44
Report hereIreland rated in “AA” category by Standard & Poor's
Rating Outlook/ Date of last Date of next
Long-term Short-term
Agency Trend change review
Standard &
AA- A-1+ Stable Nov 2019 Nov 2021
Poor's
Fitch Ratings A+ F1+ Stable Dec 2017 July 2021
Moody's A2 P-1 Stable Sept 2017 Aug 2021
DBRS
A(high) R-1 (middle) Stable May 2020 July 2021
Morningstar
R&I A+ a-1 Stable Jan. 2021
KBRA AA- K1+ Stable Jan. 2020 Dec 2021
Scope AA- S-1+ Stable May 2021 Nov 2021
45
Source: NTMASection 4: Structure of Irish economy Multinationals distort the “true” economic 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
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 (2020 data)
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.Withdrawal Agreement in 2019 solves Northern Ireland land
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.
57Impact of Brexit on Ireland will be net negative but deal
means the shock is smaller & spread over longer 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
58
Source: CBI, NTMA analysisImports more affected than exports in early 2021 by new
trading arrangements
Imports from UK fell sharply post-Brexit – UK exit from single market will continue
trade with NI jumped in Q1 trend of lower goods trade between IE & UK
30% 60%
20% 50%
10%
40% Down 10%
since Brexit
0% vote
30%
-10%
20%
-20%
-30% 10%
-40% 0%
2019
2012
2012
2013
2013
2014
2014
2015
2015
2016
2016
2017
2017
2018
2018
2019
2020
2020
2021
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
59
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.
60Section 6: Property Price gains brought about by a lack of supply coming through in 2021
House prices had plateaued before the virus arrived; with
supply hampered, price increases seen in 2021 so far
House prices 14% off previous peak in 2007 Transactions returning after Covid impact
and will improve as year progresses
110 20,000 60%
18,000 50%
100
16,000 40%
90 30%
14,000
20%
80 12,000
10%
10,000
70 0%
8,000
-10%
60
6,000 -20%
50 4,000 -30%
2,000 -40%
40
0 -50%
Q1 2011
Q2 2010
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
30
2005
2007
2009
2011
2013
2006
2008
2010
2012
2014
2015
2016
2017
2018
2019
2020
National Excl. Dublin Dublin Transactions Y-o-Y Change (RHS)
Source: CSO; BPFI, PPR, Department of Housing 62Covid-19 has impacted supply for 2020 and 2021 – Q1
supply impacted by lockdown
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 2021 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 2020 based on market estimatesMedium-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 64Mortgage drawdowns fell off given Covid restrictions but
have begun to increase since initial trough
Mortgage drawdowns (000s) rose from Non-mortgage transactions still important
deep trough before Covid-19 impact
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 coming through with inflation
starting to show and rents pressure back
House prices up 4.4% in the year to April Rents pressures returning - more so in the
2021 regions rather than Dublin
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 remain well below 2008
levels
Deviation from average price-to-income ratio (2020, red dot represent Q1 2008)
50%
40%
30%
20%
10%
0%
-10%
SD LX NL BG OE DN NW FR UK EA ES PT IE BD GR FN IT
Deviation from average price-to-rent ratio (2020, red dot represent Q1 2008)
100%
80%
60%
40%
20%
0%
-20%
SD NW BG UK LX DN FR NL ES IE OE EA FN 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 Banking Sector Overview – less competition
possible
• 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.
• Ulster Bank and KBC (no govt. ownership) has decided to leave Irish banking market. Reduced
competition is main impact.
• The Irish government intends to sell part of its 13.9% share in BOI over the next 6 months. The pace of
shares sold will depend on market conditions. Shares not to be sold below a certain level.
• 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
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
11
Leverage Ratio (fully phased-in definition )
10 Estonia
IE
9
Greece
Cyprus
8
7 MT
Lithuania
Italy LX
6 Spain
FR BD
5
4
10 15 20 25 30 35
Common equity Tier 1 ratio [%]
Source: ECB consolidated banking data (Q4 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 balance sheets
contracted and consolidated in last ten years
CET 1 capital ratios allow for ample 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 as economy re-opens
Mortgage arrears (90+ days) Principal Dwelling Mortgage arrears
(thousands)
20% 12.0
10.0
18%
8.0
16% 6.0
14% 4.0
2.0
12% 0.0
10% -2.0
-4.0
8%
-6.0
6% -8.0
10 11 12 13 14 15 16 17 18 19 20 21
4%
2%
0% Over 90 days 90-180 days 181-360 days
13 14 15 16 17 18 19 20 21
361-720 days >720 days Total change
PDH + BTL (by balance) PDH + BTL (by number)
Source: CBI
72The 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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