Ireland: Strong recovery aided by vaccine rollout and fiscal support - NTMA Investor Presentation October 2021
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Ireland: Strong recovery aided by
vaccine rollout and fiscal support
NTMA Investor Presentation
October 2021
Index
Summary – Page 3
Macro – Page 8
Fiscal – Page 23
NTMA Funding – Page 32
ESG Sustainability – Page 42
Structure of Irish economy – Page 53
Brexit – Page 62
Property – Page 68
Banks & other data – Page 75
2
Summary
Irish economy has shown remarkable
resilience amid Covid shock
3
Economic recovery strengthening
Vaccine rollout underpins spending led recovery
Domestic demand* gives better picture Unemployment steadily falling as Value added from ICT & pharma has
of Covid economic impact economy begins its recovery given Ireland resilience
30% 700 250
25% 600
200
20% 500
15% 400 150
10% 300
5% 200 100
0% 100
-5% 0 50
-10%
Mar-20
Apr-20
Feb-20
Aug-20
Nov-20
Jan-21
Apr-21
Jan-20
Jul-20
Sep-20
Feb-21
Mar-21
Jul-21
Sep-21
Aug-21
May-20
Dec-20
May-21
Jun-20
Oct-20
Jun-21
-15% 0
1998
1996
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2005
2007
2010
2012
2015
2017
2020
Unemployment claimants GVA: Domestic sectors
Domestic Demand GDP (Index, Jan 20 = 100)
GVA: Multinational dominated sectors
(€bns)
Source: CSO, NTMA Analysis
4
* Domestic demand series accounts for multinational activity and known as modified final domestic demand (excludes inventories)
Ireland’s Debt to GNI* to rise modestly in 2021
Large fiscal response to Covid but Government aims for primary surplus by 2023
2021 GG deficit forecasted at €13.3bn Debt position reversed by Covid Debt fell from 166% to 95% of national
(5.9% of GNI*) response income pre-Covid
10% 180%
Debt-to-GNI*
5% 160%
(106% 2021f; 95% in 2019)
140%
0%
120%
Debt-to-GG Revenue
-5% 100%
(254% 2021f; 232% in 2019)
-10% 80%
60%
-15% Average interest rate 40%
-20% (1.4% 2021f, from 2.2% in 2019) 20%
1995 2000 2005 2010 2015 2020 0%
Debt-to-GDP^ 1995 2000 2005 2010 2015 2020
GG Balance (% GNI*)
(55% 2021f, from 57% in 2019)
Primary Balance (% GNI*) Debt to GNI* Debt to GDP
Source: CSO, Department of Finance forecasts
^ Debt to GDP is not an appropriate metric to use for Ireland
5
Medium term economic challenges
Covid recovery, deficit reduction and OECD tax reform
Recovery Fiscal Tax
Restrictions have been Significant stimulus of c.23% Corporate tax reform led by
mostly eased and vaccine of GNI* announced since the OECD possibly reduces
rollout a success 2020 but not likely to be all future growth path
used
Timely labour market and Global minimum tax rate at
spending data suggest In time public support to 15% does not negate
recovery began in Q2 and economy to be reduced Ireland’s FDI approach but
continued into Q3 recent success may be hard
to replicate
6NTMA funding range of €18-20bn for 2021
€17.5bn already funded this year
Flexibility >10 years AA-
Ireland has large cash Weighted average maturity Ireland rated in the AA
balances and no of debt one of longest in category with S&P
redemptions until March Europe
2022 Despite Covid impact both
The ECB’s QE programs have Moody’s and DBRS have
In addition to bond funding, enabled NTMA to extend upgraded the outlook for
Ireland received €2.5bn in debt maturities and reduce Ireland to positive
EU Sure funding in Q1 interest cost. highlighting Ireland’s
resilience and fundamentals
7Macro
Rebound in spending and labour
market highlights recovery
8Case numbers rising in recent weeks
Hospitalisations and deaths have increased but from a low base
14 day Covid-19 cases/deaths per 100k of population Ireland case numbers versus other countries (per 100k of
population)
1,400 25 1,400
1,200 1,200
20
1,000 1,000
800 15 800
600 10 600
400 400
5
200 200
- - -
Jul-20
Nov-20
Jan-21
Jul-21
Mar-20
Sep-20
Mar-21
Sep-21
May-20
May-21
Cases Deaths (RHS) Ireland Germany US UK
Source: DataStream
9Vaccine rollout has been a success
c. 75% of total population fully vaccinated
Rollout progress shielding populace from worst of Delta Ireland near the top in terms of vaccine rollout in Europe
variant
80% 91%+ of Portugal
70% population aged Spain
60% Canada
12+ fully Italy
50% vaccinated Japan
40% Ireland
Finland
30% France
20% Netherlands
Belgium
10% UK
0% EU28
Germany
US
0 20 40 60 80 100
% of total population fully vaccinated Population: % fully vaccinated
% of total population with at least one dose Population: % one dose
Source: ECDC, HSE, DataStream
10Ireland performed relatively well amid Covid
GDP growth does not tell the appropriate story, domestic demand gives the best guide
GDP growing strongly, modified domestic demand began Covid impact (-4.9%) smaller for Ireland than EA and UK -
rebound in Q2 – MDD likely back to 2019 levels by year-end recovery forecasted to be stronger than others
40% 110
108
30% 106
104
20% 102
100
10% 98
96
0% 94
92
-10% 90
-20%
2013
2005
2007
2009
2011
2015
2017
2019
2021
Domestic Demand GDP 2020 (2019 = 100) 2021 2022
Source: CSO, Department of Finance forecasts, IMF forecasts for other economies
Note: MDD for Ireland is modified for multinational activity by Ireland’s Central Statistics Office (CSO). MDD = 11
Consumption + Government (current) spending + Modified InvestmentConsumer spending rebounded in Q2
Strong recovery in spending data continued in Q3
Recovery in modified domestic demand in Q2 was driven by Spending continued into Q3: now five straight months of card
spending after restrictions eased (y-o-y growth) spending in excess of 2019 levels
16% 60%
12%
40%
8%
4% 20%
0% 0%
-4%
-20%
-8%
-12% -40%
Nov-20
Sep-20
Mar-21
Sep-21
Jan-20
Jul-20
Jan-21
Jul-21
Mar-20
May-20
May-21
-16%
2006 2008 2010 2012 2014 2016 2018 2020
Investment Consumption Spending on debit & credit cards (y-o-y change)
Other MFDD Spending on debit & credit cards (versus 2019 average)
Source: CSO, CBI
* MFDD is a domestic demand series, it accounts for multinational activity and known technically as modified final 12
domestic demand (excludes inventories)Sector performance during Covid period
Multinationals outsized performance, domestic side hit hard
50%
40% 36%
Domestic sectors hit hard –
30% these has begun to recover
19%
20% as restrictions eased
10% 1% 1%
0%
-10% Two sectors 0%
least impacted -9% -11%
-20%
are dominated -19% -19%
-30% by FDI -26%
-40%
Industry (Incl. ICT Agri, Forest Public Admin, Real Estate Prof, Admin Fin and Construction Dist, Trans, Arts,
Pharma) and Fish Educ & Health and Support Insurance Hotels and Entertainment
Rest
GVA Growth (2020 Q3 to 2021Q2 versus 2019)
Source: CSO
13Labour market improving in recent months
Unemployment rate slowly decreasing as workers fall off income support schemes
Covid-19 adjusted unemployment rate* fell to 10.0% in Those on the pandemic unemployment payment scheme are
September spread across all sectors with focus on retail/hospitality
35 Arts, Agri + others Construction
entertainment 1% 9%
30 Financial & 3%
Other
25 real estate Sectors
5% 8%
20
Industry
15 7% Wholesale &
retail trade
10 10.0 Health
16%
4%
5 Education
6.4 4% Transport
0
Admin 4%
2016
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2017
2018
2019
2020
2021
Public admin
2% services Hotels, Rest
12% 17%
Unemployment Prof, sci, tech
services ICT
Covid-19 Adjusted Unemployment 5% 3%
Source: CSO, DSP
* The CSO have estimated this as the upper bound of the unemployment rate. The CSO have urged caution around 14
this data given the likelihood of revisions and the unique nature of employment in the pandemic.50% fall in those on income support
c. 400k on income support; down from above 800k in Q1 2021
Those on the PUP has fallen below 100k but fall in EWSS Supports helped disposable income grow in 2020 more akin
number much more gradual to US than EU
1.2 10%
Millions
8%
1 6%
0.8 4%
2%
0.6 0%
0.4 -2%
-4%
0.2 -6%
France
Australia
Belgium
Greece
Denmark
Italy
EA-19
UK
US
Germany
Austria
Ireland
Netherlands
Portugal
Canada
EU-27
Spain
0
Apr-20
Jan-21
Nov-20
Mar-20
Jul-20
Jul-21
Aug-20
Sep-20
Feb-21
Mar-21
Apr-21
Aug-21
Sep-21
Dec-20
May-20
Jun-20
Oct-20
May-21
Jun-21
Wage Subsidy Scheme (TWSS/EWSS) Gross Disposable Household Income (y-o-y change
Pandemic Unemployment Payment 2020)
Source: Revenue, DSP, CSO, DataStream
15Consumption fell in Q1 but rebounded in Q2
Consumption is up 12.6% q-o-q in Q2 2021
Q2 data best since pandemic began, still behind 2019 levels Retail sales strength alongside economy re-opening
30 30% 40%
25 20% 20%
0%
20 10%
-20%
15 0% -40%
10 -10% -60%
5 -20% -80%
-100%
0 -30%
19M01
19M03
19M05
19M07
19M09
19M11
20M01
20M03
20M05
20M07
20M09
20M11
21M01
21M03
21M05
21M07
2008
1998
2000
2002
2004
2006
2010
2012
2014
2016
2018
2020
Consumption Growth (Y-o-Y, RHS) All Retail Food Retail
Consumption (€bns, LHS) Bars Department Stores
Source: CSO
16
Note: RHS chart growth rate versus two years previouslyQ1 investment impacted by lockdown
Construction sector moved in & out of lockdown but now open since April
Investment hit in Q1 but impact more muted thanks to M+E IP distortions less than in previous quarters – surge in 2020
investment (annual change) likely tax regime related
40% 300
30% 250
20%
10% 200
0%
150
-10%
-20% 100
-30%
-40% 50
1997 2000 2003 2006 2009 2012 2015 2018 2021 0
2004 2006 2008 2010 2012 2014 2016 2018 2020
Investment
Building & Construction Building Investment Other Domestic Inv.
Distortions (mainly IP) Modified GFCF
Investment ex B+C Total GFCF
Source: CSO; NTMA calculations
17
RHS Chart is 4Q sum in Euro billionsHousehold balance sheets improving
Debt levels much lower coming into pandemic + new Covid savings
Gross HH saving rates have jumped in Ireland more than in Legacy of 2008-12 financial crisis is on Government not
most countries due to forced savings/income supports private balance sheets
30 180%
157%
Savings as % of Disp. Income (4Q MA)
160%
25 135%
140% 129%
20 120% 109% 105%
100%
15 80% 71% 69% 64%
60% 44% 51%
10 35%
40% 18%
5 20%
0%
0 Household debt SME debt (% of Public debt (% of
2007
2002
2003
2004
2005
2006
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
(% of GNI*) GNI*) GNI*)
Ireland EA-19 UK 2003 2008 2013 2020
Source: Eurostat, ONS, CSO ; CBI
Note: Gross Savings as calculated by the CSO has tended to be a volatile series, some caution is warranted when interpreting 18
this dataExternal environment supportive
2021 seeing the global economy rebound given large stimulus & vaccines
2020 2021 Exports driven by demand for multinationals products –
Pharma. and Tech
EA Monetary Policy Max accommodative Max accommodative
50%
EU Fiscal Policy Expansionary Expansionary 40%
30%
Max 20%
US Monetary Policy Max accommodative
accommodative*
10%
US growth Covid-19 shock Rebound 0%
-10%
Significantly down
Oil price Rising -20%
despite rebound
2018
2000
2002
2004
2006
2008
2010
2012
2014
2016
2020
Covid-19 shock; Brexit resolved;
UK growth
Brexit unresolved Rebound
Exports
Euro Growth Covid-19 shock Rebound
Chemical Products and Computer Services
EA Inflation Close to Zero Rising Exports ex. Chem & Comp
Source: NTMA analysis, CSO
19
*prior to the probable Q4 taperInflation at 3.7% in Ireland
But largely seen as transitory as with rest of euro area
Inflation has jumped after subdued decade Energy prices driving much of inflation currently
8 4
6 3
4 2
2 1
0
0
-2
-1
-4
-2
2009
1997
1998
1999
2001
2002
2004
2005
2006
2008
2011
2012
2014
2015
2016
2018
2019
2021
2014 2015 2016 2017 2018 2019 2020 2021
HICP Ireland HICP Euro Area Energy Ex. Energy HICP Ireland
Source: CSO, Eurostat, NTMA analysis
20OECD’s BEPS process may impact FDI offering
Ireland signs up to agreement after initial reservations
Pillar One: proposal to re-allocate taxing rights on non- Pillar Two: 15% minimum effective global tax rate
routine profits
Over 130 countries have signed on for the BEPS 2.0 two- Countries will introduce a minimum effective tax rate with
pillar set of reforms. the aim of reducing incentives to shift profits.
The first pillar focuses on proposals that would re-allocate Where income is not taxed to the minimum level, there
some taxing rights between jurisdictions where companies will be a ‘top-up’ to achieve the minimum rate of tax.
reside and the markets where user/consumers are based. Ireland had reservations on the minimum tax rate proposal
Under such a proposal, a proportion of profits would be re- but signed up after further clarity was given.
allocated from small countries to large countries. The minimum rate is greater than the 12.5% rate that
Ireland levies and thus some of Ireland’s comparative
Pillar 1 will reduce Ireland’s corporation tax base. Some
advantage in attracting FDI will be lost.
estimates place the hit at up to €2bn per annum by the
middle of the decade. Ireland can lean on other positives; educated and young
workforce, English speaking, EU access, and ease of doing
Ireland has always been fully supportive of Pillar One business
despite the implied cost to the Exchequer.
At 15% corporate tax rate, Ireland’s rate remains one of the
lowest in the EU.
21Underlying growth robust pre-Covid
MNCs profits ultimately repatriated but growth obvious after adjusting for distortions
Ireland’s income = wages (all sectors) + domestic sectors Pre-Covid, Ireland had a robust underlying economy;
profits + tax on MNC profits compared favourably to EA (2008 = 100)
250
200
Comp of 150
Employee,
MNC 100
29%
Sector
Profits, 50
46%
0
Domestic
Sector
Profits,
MNC Sector Profits Domestic Sector Profits
25%
Compensation of Employee Real GVA ex. MNC Profits
Real GVA - EA19
Source: CSO, NTMA calculations (Nominal 2020 data used in left chart)
22
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 estimated for the sectors in which MNCs dominate.Fiscal
Revenues have shown remarkable
resilience helping narrow deficit
23Fiscal policy response to Covid has been swift
Large deficit expected in 2021 but smaller than 2020
Response Revenues Debt
Total fiscal response of Ireland’s economic structure Debt ratios have reversed
€48bn since 2020 (c. 23% of has meant revenues have due to Covid
GNI*) is large but may not held up despite Covid-19
be fully used
Strength of both Corporate Gross Government debt
Ireland has responded to and Income tax revenues 57% of GDP at end-2019 but
Covid with first attempt at from multinational sectors close to 95% of GNI*.
counter-cyclical fiscal policy has helped sustain Ratios forecasted at 55%
in its 100 year history government finances and 106% for end-2021
24Ireland’s Covid fiscal aid c. 23% of GNI*
Highly skewed to direct supports unlike others in EU
Total Covid-19 fiscal response (% of GDP/GNI*) 2021 GG Balance (forecast, % of GDP or GNI*): Ireland’s
figure revised downwards significantly to -5.9%
50 0
40 -2
-4
30 -6
20 -8
-10
10 -12
0 -14
-16
NL
Sweden
Norway
Denmark
Belgium
France
Finland
Singapore
Australia
UK
Germany
US
Portugal
Korea
Canada
Spain
Japan
Switzerland
New Zealand
Ireland (GNI*)
-18
Italy
Denmark
Belgium
France
Sweden
Austria
Greece
Finland
Germany
UK
EA-19
Slovenia
Japan
US
Portugal
Netherlands
Spain
Ireland (GNI*)
Switzerland
Direct Supports Indirect Supports
Source: IMF, European Commission, Department of Finance
25
Direct supports = Additional spending and forgone revenue. Indirect supports = Equity, loans, and guaranteesFiscal response to Covid is opposite of GFC
Interest bill won’t balloon and investment set to increase
After global financial crisis, Ireland cut capital spending, paid …now revenues are more resilient, spending (incl. inv.)
more interest as taxes fell… increases, interest bill unchanged
30 25
€bns
€bns
25
20
20 GG Capital
15 expenditure 15
10 GG Interest 10
5 Costs
0 5
GG Expenditure
-5 (underlying) 0
-10
GG Revenue -5
-15
-20 -10
07 08 09 10 11 12 13 19 20 21f 22f 23f 24f 25f
Source: CSO, Department of Finance forecasts. Charts represent the change in billions for selected fiscal variables versus
2007/2019 levels. Underlying GG expenditure numbers used (excludes banking recapitalisations)
26Covid-19 stimulus hits deficit in 2020/21
After 2021 Ireland plans for primary surplus in 2023 and GG balance in 2025
Gen. Govt. Balance (% of GNI*) will be in significant deficit in Revenues strong in 2021 so far; income tax and corporate tax
2020/21 are strong versus pre-pandemic levels
10% 50%
5% 40%
0% 30%
20%
-5%
10%
-10%
2021f
GGB % of 0%
-15% GNI* -5.9%
-10%
-20% 2021f 2021 vs 2019 (YTD)
2023f
2025f
1995
1997
1999
2001
2003
2005
2007
2009
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
^ Underlying GG and primary balance numbers used (excludes banking recapitalisations) 27GG debt to GNI* increasing on Covid response
Debt close to 106% of GNI* in 2021 jump of 11pp versus 2019
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 28The “i-g” snowball effect to likely swing back
Low interest rates coupled with reversion to growth underpins debt dynamics
With low rates locked in, Ireland’s “hurdle rate” for a positive Histogram of Ireland’s recent growth history (2001-2020)
snowball effect is low
25% 10
Nominal GNI* grew by
20%
Number of years
8 more than 4% in 14 of last
15% 20 years
10% 6
5% 4
0%
2
-5%
-10% 0
-6-4%
-4-2%
8-10%
12%+Revenues resilient against Covid
CT revenue cushioned by Pharma and ICT; income tax protected by nature of shock
Corporation tax (CT) receipts to plateau after nearly tripling Progressiveness of income tax system and sector mix limits
since 2014 hit to overall receipts
25% 18 40%
20% 15 35%
12 30%
15% 25%
9
10% 20%
6
5% 15%
3
10%
0% - 5%
2021f
2023f
2025f
2001
1995
1997
1999
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 30Alternative Debt Metrics
Need to assess other metrics apart from debt to GDP when analysing debt sustainability
2021f GG debt to GG revenue % GG interest to GG rev % GG debt to GDP %
Greece 424% 5.6% 209%
Italy 340% 7.1% 160%
Portugal 292% 6.0% 127%
Spain 287% 5.1% 120%
UK 284% 5.1% 108%
Cyprus 265% 4.9% 112%
Ireland 254% 3.5% 55% (106% GNI*)
Belgium 231% 3.4% 115%
France 225% 2.3% 117%
EA19 222% 3.0% 102%
Austria 180% 2.5% 87%
EU28 176% 3.3% 78%
Germany 159% 1.2% 73%
Slovakia 142% 2.8% 59%
Finland 137% 1.0% 71%
Netherlands 134% 1.2% 58%
Source: EU Commission, Department of Finance forecasts for Ireland
31NTMA Funding
Flexibility in funding strategy due to cash
balances, smooth maturity profile and
no 2021 bond redemptions
32NTMA funding range of €18-20bn for 2021
€17.5bn already funded this year
Flexibility >10 years AA-
Ireland has large cash Weighted average maturity Ireland rated in the AA
balances and no of debt one of longest in category with S&P
redemptions until March Europe
2022 Despite Covid impact both
The ECB’s QE programs have Moody’s and DBRS have
In addition to bond funding, enabled NTMA to extend upgraded the outlook for
Ireland received €2.5bn in debt maturities and reduce Ireland to positive
EU Sure funding in Q1 interest cost. highlighting Ireland’s
resilience and fundamentals
33High level of flexibility in NTMA issuance plans
Helped by smoother maturity profile and no bond redemptions in 2021
22
20
18
16
14
12
10
8
Billions €
6
4
2
0
Bond (Fixed) EFSM EFSF Bond (Floating Rate) Green Other (incl. SURE)
Source: NTMA
34Near-term redemptions lower than recent past
Lower borrowing costs also provides NTMA with flexibility
NTMA issued €110bn MLT debt since 2015 at 13.6 yr. Revised borrowing requirements suggest NTMA issuance
weighted maturity and avg. rate 0.73% won’t match recent past in coming years
30 5.5 6 80
25 5 70
3.9
20 4 60
2.8
15 3 50
10 1.5 2 40
0.9 1.1 0.9
0.8 30
5 0.2 0.2 1
20 Redemptions
0 0
2012 2013 2014 2015 2016 2017 2018 2019 2020 21 10
YTD 0
Syndication (€bns) Auction
Issuance (2018-2021) Redemptions + est. EBR
Avg. Yield % (RHS) (2022-25)
Source: NTMA, Department of Finance LHS chart showing marketable MLT debt (auctions and syndications). Other
35
issuance such as inflation linked bonds, private placement and amortising bonds occurred but not shown.NTMA has lengthened weighted maturity
Debt management strategy took advantage of QE to extend debt profile since 2015
Various operations have extended the maturity of …Ireland (in years) compares favourably to other EU
Government debt … countries (end-July)
20 12
10
15
8
10 6
11.1 10.7 10.6
4 8.2 8.2 7.9 7.7 7.2
5 7.2 7.0 6.9
2
0 0
2015 2016 2017 2018 2019 2020 2021 AT BG IR ES NL FR DK FN BD IT 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
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.Funding needs and sources
Borrowing requirement lower in 2021 means extra cash into 2022
€25
No bonds mature in 2021. The next bond redemption is Change in Cash Other: 2.5
not until March 2022. 3.7
Sure: 2.5
€20
Other: 4.4
The Exchequer Borrowing Requirement (EBR) for 2021 is
UK Bilateral: 0.5
set to be lower than expected at €12.1bn. Thus, NTMA will
€15 Net Short-term
enter 2022 with a large cash balance of greater than paper 4.4
€20bn.
Bond issuance:
€10
20.1
In 2021, NTMA has received monies from the EU SURE
scheme. It is a diversified source of funding (c. €2.5bn). EBR: 12.1
€5
Source: NTMA
€-
Notes: Funding Requirements (€bn) Sources of Funding (€bn)
Rounding may affect totals
1. The NTMA bond funding range for 2021 is €18-€20bn. While €19bn is reflected as an indicative estimate in the chart, it
also includes cash proceeds from issuance undertaken to end-September.
2. Other funding needs includes provision for the potential bond/FRN purchases and general contingencies.
3. Other funding sources includes retail (State Savings) and private placements.
4. SURE refers to the European instrument for temporary Support to mitigate Unemployment Risks in an Emergency. 37
5. EBR is the Department of Finance’s Budget 2022 (Oct 2021) estimate of the Exchequer Borrowing RequirementECB’s PEPP & PSPP offering strong support
Flexibility (no limits) & size (€1.85trn) of pandemic purchases is noteworthy
6 80
€ Billions
5 70
60
4 50
3 40
2 30
20
1 10
0 0
Q1 2015
Q2 2019
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
Q1 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Q3 2021
Q1 2022f
Q4 2021f
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%; will increase further with Eurosystem’s PEPP
Ireland roughly split 80/20 on non-resident versus resident “Sticky” sources - official loans, Eurosystem, retail - make up
holdings (Q1 2021) over 55% of Irish debt
250
200
Other Debt
(incl. Official) 150
22% IGBs - Private
Non Resident 100
32%
Retail, 50
Resident
11% 0
2016
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2017
2018
2019
2020
2021
IGBs - Private IGBs - Private Non Resident IGBs - Private Resident
Eurosystem Short term Eurosystem
Resident
25% Short term Retail Other Debt (incl. Official)
6%
4% Total Debt (€bns)
Source: CSO, Eurostat, CBI, ECB, NTMA Analysis
IGBs excludes those held by Eurosystem. Eurosystem holdings include SMP, PSPP, PEPP and CBI holdings of FRNs. Figures do
not include ANFA. Other debt has included IMF, EFSF, EFSM, Bilateral as well as IBRC-related liabilities over time. Retail
39
includes State Savings and other currency and deposits. The CSO series has been altered to exclude the impact of IBRC.Investor base
Demand for Government bonds is wide and varied
Country breakdown: Investor breakdown:
Average over last five syndications Average over last five syndications
8.8% 10.0%
14.6%
11.8% 31.6%
24.0%
42.4% 7.2%
46.6%
Ireland UK
US and Canada Continental Europe Fund/Asset Manager Banks/Central Banks*
Nordics Asia & Other Pensions/Insurance Other
Source: NTMA
40
* Does not include ECB. ECB does not participate on primary market under its various asset purchasing programmesCredit Rating for Ireland
Ireland rated in “AA” category by Standard & Poor's
Outlook/ Date of last Date of next
Rating Agency Long-term Short-term
Trend change review
Standard & Poor's AA- A-1+ Stable Nov 2019 Nov 2021
Fitch Ratings A+ F1+ Stable Dec 2017 2022
Moody's A2 P-1 Positive Aug 2021 2022
DBRS Morningstar A(high) R-1 (middle) Positive July 2021 2022
R&I A+ a-1 Stable Jan. 2021 2022
KBRA AA- K1+ Stable Jan. 2020 Dec 2021
Scope AA- S-1+ Stable May 2021 Nov 2021
41ESG Sustainability
Issuance & government policy
demonstrate Ireland’s green commitment
42Ireland’s Greenhouse Gas emissions
State of Play
Ireland’s emissions fell post financial crisis – Covid likely Emissions from agriculture make up a more significant
meant they fell again in 2020 portion of total In Ireland (c. 10% in EU or US)
80
Energy
60 Industries Waste
16% 2%
40 Agriculture
35%
Residential
20 11%
Manuf.
0 Combustion
2004
1990
1992
1994
1996
1998
2000
2002
2006
2008
2010
2012
2014
2016
2018
Commercial
F-gases 8%
Services
2%
Other Transport 1%
Industrial Processes Manufacturing Combustion Industrial Transport Public
Residential Energy Industries Processes 20% Services
Agriculture Total GHG emissions 4% 1%
Source: Environment Protection Agency (Ireland)
43
Note: Metric used is million tonnes carbon dioxide equivalent (Mt CO2eq))Close to OECD average on progress
But behind some of the leaders in Europe
Ireland similar to OECD but behind others when considering Ireland compares well to the OECD average
intensity metrics
GHG OECD CO2 OECD % 0.0
OECD
emissions Ranking (1st emissions Ranking (1st Renewable
Ranking (1st
per unit of = High per unit of = High energy
is desirable) 0.5
GDP Intensity) GDP Intensity) supply
Ireland 0.2 30 0.09 35 11.1 24
1.0
Ire (GNI*) 0.3 11 0.14 24
OECD 0.3 n/a 0.14 n/a 1.5
Australia 0.5 2 0.32 2 7.1 35
Belgium 0.2 19 0.17 14 7.8 32 2.0
Canada 0.5 4 0.34 1 16.4 18
France 0.2 33 0.10 34 10.7 26 2.5
Germany 0.2 23 0.16 17 14.6 21
Italy 0.2 28 0.13 27 18.2 16 3.0
NL 0.2 25 0.16 17 7.2 34 Water Sustainable Climate Oceans Biodiversity
UK 0.2 32 0.12 30 12.5 23
Production
Spain 0.2 27 0.13 27 14.7 20
US 0.4 6 0.24 6 7.9 31
Ireland OECD
Source: OECD, EPA
RHS shows the average distance the country needs to travel to reach each SDG. 0 indicates that the level for 2030
has already been attained: and 3 is the distance most OECD countries have already travelled. Bars show the average 44
country performance against all targets under the relevant GoalIreland in top 20 most sustainable countries
Ireland rated highly by Sustainalytics and rating agencies on ESG
Ireland ranks 17th globally by Sustainalytics for ESG risk Moody’s view on Ireland much like other agencies – strong
governance a key risk mitigant
18
“For an issuer CIS-1 (Positive), its ESG
16
14 attributes are overall considered as having a
12
positive impact on the rating. The overall
10
8 influence… … is material”.
6
4
2
0
Germany
Qatar
Norway
Sweden
Denmark
Finland
Hong Kong
Singapore
Australia
Austria
Netherlands
Brunei
United States
Canada
Japan
Luxembourg
Switzerland
New Zealand
Iceland
Ireland
Ireland’s ESG Credit Impact Score:
“low exposure to environmental risk”
“a positive influence of its social considerations”
“very strong governance profile”
Source: Sustainalytics, Moody’s
45
Note: Sustainalytics score is out of 100, closer to zero means less ESG riskClimate Action Legislation
The Climate Action & Low Carbon Development Bill 2021 supports transition to Net Zero by 2050
• Carbon Budgeting: The Bill embeds the process of carbon budgeting into law. It requires
Government to adopt a series of economy-wide-five-year carbon budgets. 80
• Sectoral Action Plans: Actions for each sector will be detailed in the Climate Action Plan, 60
updated annually.
40
• Climate Action Strategy: A national plan will be prepared every five years.
20
• Legally binding targets: Govt. Ministers responsible for achieving targets for their sector.
0
1994
1990
1998
2002
2006
2010
2014
2018
2022
2026
2030
• 51% reduction: First carbon budgets will aim for a reduction of 51% of emissions by 2030.
GHG emissions ((Mt CO2eq)))
• All of Government approach: Local Authorities is required to prepare a Climate Action
Plan and public bodies obliged to conduct their functions in line with the national plan. Implementing 2019 Climate Action Plan
Without legislated measures
• Gas Exploration: Government approved draft amendments to end the issuance of new
Climate Bill 2021 commitment
licenses for the exploration and extraction of gas.
Source: Department of the Environment, Climate and Communications, EPA, NTMA Economics analysis
46Irish Sovereign Green Bonds (ISGB)
Cumulative €6.3bn allocated to green projects following third year
• €6.1bn nominal outstanding (€6.5bn cash equivalent) • Launched 2018 and based on ICMA Green Bond Principles –
• Circa €200mn remains to be allocated to eligible Use of proceeds model
expenditure in 2021 • Governed by a Working Group of government departments
and managed by the NTMA
• Issuance through two syndicated sales and one auction
• Compliance reviews by Sustainalytics
• Pipeline for eligible green expenditure remains strong Top 10 Issuers Amount Outstanding
% of Total Debt
Globally (US$bn equiv.)
• The Climate Action and Low Carbon Development France 45 1.4%
Germany 29 1.1%
(Amendment) Bill 2021 will support Ireland’s transition to
United Kingdom 22 3.6%
Net Zero Belgium 13 2.5%
Netherlands 12
• ISGB 2020 Allocation Report Chile 7 0.2%
Indonesia 7
• ISGB 2019 Impact Report Ireland 7 2.7%
Hong Kong 7
Spain 6 0.2%
Source: Bank of America, bonddata.org
47Irish Sovereign Green Bonds (ISGB)
Allocation of ISGB funding has focused on Water/Waste management and transportation
Built
€3,000 Sustainable water
Environm
and wastewater
ent/
€2,500 management
energy
30%
efficiency
€2,000 5%
€1,500
€1,000
€500 Clean
transport
€0 ation
Allocation €million Mgmt of 54%
natural
resources 8% Climate change
Tidal defences and public space enhancement; Clonakilty adaptation 3%
2017/8 2019 2020
Flood Relief Scheme
48Irish Sovereign Green Bonds (ISGB)
Irish Sovereign Green Bond Impact Report 2019: sample impacts
Some highlights from Report*
• Built Environment/ Energy Efficiency
• Energy saving (GigaWattHours) : 621.06
• Number of homes renovated : 24,777
• EV home charger grants provided: 2,548
• Clean Transportation
• Number of public transport passenger journeys : 294.6
million
• Greenway users: 1,196,428**
• Take-up of Grant Schemes/ Tax foregone provided
(number of vehicles) : 24,122
• Climate Change Adaptation
• 13 major Flood relief projects at planning, development
or construction phase.
• 6,685 properties protected on completion Rediscovery Centre Ballymun; A-rated retrofitted sustainability and reuse centre
*For a more detailed break-down please see the ISGB 2019 Impact Report
** Raw count from 3 longest Greenways- Waterford, Old Rail Trail, Royal Canal 49
GreenwayIrish Sovereign Green Bonds (ISGB)
Irish Sovereign Green Bond Impact Report 2019: sample impacts cont.
Some highlights from Report*
Environmentally Sustainable Management of Living Natural
Resources and Land Use
Number of hectares of forest planted : 3,550
Number of Landfill Remediation projects being funded: 76
Renewable Energy
Number of companies (including public sector organisations)
benefitting from SEAI Research & Innovation programmes as lead,
partner or active collaborators : 36
SEAI Research & Innovation awards: 46
Sustainable water and wastewater management
Water savings (litres of water per day) : 160 million
New and upgraded water and wastewater treatment plants : 14
Length of water main laid (total) : 393km
Irish peatlands; Clara Boardwalk
*For a more detailed break-down please see the ISGB 2019 Impact Report 50Ireland compares well to OECD on “S&G”
Based on the 17 Sustainability and Development Goals of the UN
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Poverty
Cities
Climate
Oceans
Energy
equality
Economy
Inequality
Water
Biodiversity
Institutions
Food
Health
Infrastructure
Education
Implementation
Sus. production
Gender
Ireland OECD
Source: OECD (2019)
Each bar shows “distance” country needs to travel to reach each SDG. Distances are measured in standardised units
with 0 indicating that the level for 2030 has already been attained: and 3 is the distance most OECD countries have
already travelled. Bars show the average country performance against all targets under the relevant Goal for which 51
data are available, and diamonds show the OECD average.NTMA Best Practice
NTMA aiming to be a domestic leader in ESG
NTMA-wide ISIF
• Objective of making the NTMA the most sustainable • Goal to reduce carbon intensity of the global portfolio by
public service workplace in Ireland - Strategy goal of 50% by 2025.
becoming an environmentally sustainable and net zero • In the Irish portfolio the strategy is two-fold;
emissions organisation by 2030.
• help Ireland meet its emissions targets by 2030 by
• Our office building has achieved an A3 BER rating and investing in sustainable infrastructure
LEED Platinum certification.
• achieve Net Zero by 2050 or earlier by investing in new
• Working on collating agency wide data as we seek to technologies and business models that will underpin
baseline our current emissions ahead of delivering Net this transition
Zero commitment
NDFA
• Established a NTMA Sustainability Group which supports
• Advising State Authorities on a number of climate related
the delivery of climate initiatives across the NTMAs
capital projects
mandates and drives the NTMA’s Climate Action Strategy.
New Era
• Continues to progress a Climate Framework for the
commercial semi-states
52Structure of the Irish
Economy
Multinationals distort the “true”
economic picture but have added
resilience during Covid-19
53Multinational activity distorts Ireland’s data
Notwithstanding those issues, MNCs have real positive impact
Multinationals dominate GVA: profits are booked here but Domestic side of economy adds jobs; MNCs add GVA/high
overstate Irish wealth generation wages
Arts & Other Share of Share of Share of Gross Weekly
1% Employment Wage Bill GVA Earnings €
Professional (2020) (2019) (2020) (Q4 2019)
Public
services Agriculture 4.5% 1% 1% N/A
sector
10% 11% Industry (incl.
12.2% 15% 38% 916
Pharma.)
Industry Construction 6.2% 4% 2% 821
Real estate (incl.
6% Pharma) Dist., Tran,
25.4% 17% 9% 571
38% Hotel & Rest
Financial & ICT (Tech) 5.4% 9% 17% 1,241
insurance Financial 4.5% 8% 4% 1,235
4% Real Estate 0.4% 1% 6% 730
Dist, tran, Professional 10.8% 13% 10% 810
hotel & rest ICT (Tech)
18% Public Sector 25.6% 30% 11% 836
9%
Arts & Other 5% 2% 1% 514
Source: CSO
54
2020 Nominal GVA used€0.5trn of intellectual property into Ireland
Assets brought here by tech. & pharma. in recent years
Ireland is now a leader in Computer Services; Exports have Enormous inflows (c. €0.5trn) of IP assets into Ireland since
trebled since 2014 2015 on the back of BEPS reforms
120 16.0% 300
€billions, Constant prices
100 250
12.0%
80
200
60 8.0%
40 150
4.0%
20 100
0 0.0%
50
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
0
Computer Services Exports (€bn) 1995-2014 2015 2016-19
Chemical Products (€bn)
% 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
55Ireland has navigated global economy
Ireland has moved with trends this century (even after adjusting GVA)
Euro Area manufacturing base hollowed out over time: The digitalisation of the economy: Ireland able to grow its
Ireland less impacted than most tech sector in recent years
2 3
0 2.5
-2 2
-4 1.5
-6 1
-8 0.5
-10 0
-12 -0.5
-14 -1
EA 19
EA 19
Finland
Portugal
Portugal
Finland
Latvia
Estonia
Latvia
Estonia
Netherlands
Netherlands
Belgium
Austria
Spain
France
Cyprus
Greece
Greece
Spain
France
Belgium
Luxembourg
Germany
Ireland*
Lithuania
Cyprus
Germany
Luxembourg
Ireland*
Italy
Lithuania
Italy
Austria
Malta
Slovenia
Slovakia
Slovenia
Slovakia
Malta
Manufacturing GVA: pp change in share of economy Tech Sector GVA: pp change in share of economy
since 1999 since 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 multinationals activity. A
profit proxy is removed from the GVA data for the sectors in which MNCs dominate (parts of Manufacturing, ICT, 56
and renting and leasing services). Unadjusted Ireland’s figures are +7.1pp (manufacturing) and +6.5pp (tech sector).Underlying economy was robust pre-Covid
MNCs add real substance to IE economy
Ireland’s income = wages (all sectors) + domestic sectors Pre-Covid, Ireland had a robust underlying economy;
profits + tax on MNC profits compared favourably to EA (2008 = 100)
250
200
Comp of 150
Employee,
MNC
€101bn , 100
Sector
29%
GOS, 50
€165bn ,
Domestic
46% 0
Sector
Profits,
€87bn ,
MNC Sector Profits Domestic Sector Profits
25%
Compensation of Employee Real GVA ex. MNC Profits
Real GVA - EA19
Source: CSO, NTMA calculations (Nominal 2020 data used in left chart)
Ireland’s GVA data has been adjusted to strip out the distortionary effects of some of the multinational activity that 57
occurs in Ireland. Specifically a profit proxy is estimated for the sectors in which MNCs dominate.High value MNC activity adds to tax base
Ireland revenue less impacted by Covid
GDP overstates Ireland’s progress but is still a good Multinational sectors critical for Income tax and Corporation
barometer for Revenue, in particular CT and IT tax (2020 data)
30% 100%
20%
10% 80%
0%
60%
-10%
-20% 40%
-30%
Real Estate
Prof, Admin
Construction
Industry
ICT
Fin & Ins.
Agri, For, Fish
Dist, Trans, Hotels &
20%
Public
Arts, Entertainment
0%
Rest
VAT PAYE CT Three taxes
combined
Manufacturing (incl. Pharma) ICT (tech sector)
Admin (incl. Aircraft Leasing) Fin & Ins.
% of CT, PAYE, VAT y-o-y change in GVA (2020) Other Sectors
Source: CSO, Revenue, NTMA Calculations
Elasticity based on 1995-2019 data. E = (annual % change in tax)/(annual % change in growth variable 58Ireland’s population helps growth potential
Age profile younger than the EU average
Ireland’s population estimated at 5.01m in 2021: younger Ireland’s population will remain younger than most of its EA
population than EU counterparts
70% Japan
Greece
60% Portugal
Italy
50% Spain
Germany
Finland
40% France
Denmark
30% Ireland
UK
Belgium
20% China
Canada
10% Sweden
USA
0% WorldMigration improves Ireland’s human capital
Ireland’s net migration has swung back and forth on economic performance
Latest Census data show net migration positive since 2015 – Migration inflow particularly strong in highly educated cohort
recent slowdown due to Covid – work in MNCs attractive
150 40
30
100
20
50
10
0 0
-50 -10
-20
-100
-30
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
Third level Other Education Net Migration
Immigration Emigration Net Migration 2009-2013 annual average 2015-2021
Source: CSO
60Income equality has improved
Ireland’s progressive system the main driver and cushioned the economy in 2020
Lower inequality (1985-2015): economic rise reduced GINI Progressive system means Ireland is around the OECD
coefficient unlike others average for GINI after tax
0.06 0.8 Lower GINI score means
0.7 more equal societyc
0.04 0.6
0.02 0.5
0.4
0.00 0.3
-0.02 0.2
0.1
-0.04 0
Iceland
Australia
Greece
Latvia
Korea
Lithuania
USA
Slovakia
Sweden
Austria
Hungary
Poland
Luxembourg
Canada
Italy
Portugal
Israel
Turkey
South Africa
Finland
Belgium
Russia
Mexico
Czech Rep
Denmark
France
Switzerland
Estonia
Slovenia
Netherlands
Germany
Ireland
Spain
UK
Chile
Costa Rica
Norway
Japan
-0.06
-0.08
Belgium
Portugal
Ireland
Denmark
USA
Canada
Japan
Netherlands
UK
France
Greece
Norway
Luxembourg
Sweden
Spain
Germany
Finland
Italy
Austria
Switzerland
Pre Taxes and Transfers
GINI Coefficient (Post Taxes and Transfers)
Source: IMF, OECD
61Brexit
“Hard Brexit” risk eliminated by free
trade agreement leaving smaller long
term impact
62Brexit - Free Trade Agreement reached
Allows for tariff free trade but non-tariff barriers will increase
Main points of FTA
• From January 1 2021, the UK became 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.
63Withdrawal Agreement signed in 2019
Northern Ireland protocol within Withdrawal Agreement resolves many of the land border issues
• 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.
64Impact of Brexit on Ireland likely net negative
Deal means the shock is smaller & spread over longer horizon
Modelled impact on output versus No Brexit baseline: FTA IE trading partners: UK important for good imports (land
reduces impact significantly bridge) & services exports
0 % of Goods Services Total
total (2019) (2019) (2019)
-1
Exp. Imp. Exp. Imp. Exp. Imp.
-2
-3 US 30.8 15.5 15.8 18.6 21.9 17.9
-4 UK (ex
8.9 20.6 15.8 6.9 13.5 10.6
NI)
-5
NI 1.4 1.9 n/a n/a n/a n/a
-6
EU-27 37.1 36.7 29.8 19.8 32.8 23.8
-7
2020 2021 2022 2023 2024 2025
China 5.9 5.8 2.8 1.3 4.0 2.3
FTA WTO Disorderly No-Deal
Other 15.9 19.4 35.9 53.4 27.8 45.5
Source: CBI, NTMA analysis
65Trading flows are changing after FTA
NI imports and exports have jumped in H1 2021
NI trading route more important than ever for IE-UK trade – UK exit from single market will continue trend of lower goods
special trade status of NI a factor trade between IE & UK
30.0% 60%
25.0% NI share of total Irish 50%
trade has jumped but
20.0% remains c. 3% 40%
15.0% 30%
10.0% 20%
5.0% 10%
0.0% 0%
2006
2001
2002
2003
2004
2007
2008
2009
2011
2012
2013
2014
2016
2017
2018
2019
2021
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
2019
Exports to NI (% of exports to UK) % of Irish agri exports going to UK
Imports from NI (% of imports from UK) % of other Irish goods exports going to UK
Source: CSO
66Possible benefit: FDI inflows into Ireland
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.
67Property
Price gains in 2021 brought about by a
lack of supply and unchanged demand
68With supply hampered, prices have risen
House prices plateaued before the virus hit but since have increased rapidly
House prices still off previous peak in 2007 (=100) but up Transactions have begun to increase again after Covid
10.9% year-on-year lockdowns
110 80000 50%
100 70000 40%
90 60000 30%
50000
80 20%
40000
70 10%
30000
20000 0%
60
10000 -10%
50
0 -20%
40
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
30
2005
2006
2007
2008
2009
2010
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
69Covid-19 impacted supply for 2020 and 2021
Q1 2021 supply impacted by lockdown
Housing Completions* close to 25,000 in 2020; 20,000+ in Covid hampering supply for 2020-21 but recent housing
new dwelling completions in 2021 starts show supply is responding
30000 30000
25000 25000
20000 20000
15000
15000
10000
10000
5000
5000
0
2015 2016 2017 2018 2019 2020 2021f 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 old houses or
connections from “ghost estates” overstate the annual run rate of new building. 70
**2021 completions forecasted down 10-20% on 2020 based on market estimatesUnderlying supply demand mismatch
Housing supply still well below demand – est. need at least 33K units a year
12 Average annual New Dwelling
Thousands of housing units
10 housing demand Completions (last four
(2020-2030) quarters)
8
6
4 State 33.6 19.7
2
0
GDA 17.2 10.5
Ex-GDA 16.5 9.2
Average annual housing demand (2020-2030)
New Dwelling Completions (last four quarters) Greater Dublin Area (Dublin + Mid East) requires the
majority of needed dwellings.
Source: CSO; NTMA analysis 71Mortgage drawdowns affected by Covid
Restrictions impacted drawdowns but have begun to increase since initial trough
Mortgage drawdowns* (000s) rose in recent quarters after Non-mortgage transactions still important – c.50% of all
Covid-19 impact transactions
120 25 80%
Thousands
100 20 60%
80 15
60 40%
10
40 20%
5
20
0 0%
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2006 2008 2010 2012 2014 2016 2018 2020
Residential Investment Letting Non-mortgage transactions
Mover purchaser Mortgage drawdowns for house purchase
First Time Buyers Non-mortgage transactions % of total (RHS)
Source: BPFI; CSO
72
*4 quarter sum used (LHS)Covid-19 impact on prices coming through
Inflation starting to show and rents pressure back
House prices up 10.9% in the year to August 2021 Rents pressures return strongly after initial Covid related
softening
30% 180
Rents well
160
20% above prices
140
10% 120
0% 100
80
-10%
60
-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 73Price valuation metrics well below 2008 level
Deviation from average price-to-income ratio (2020, red dot represent Q1 2008)
60%
40%
20%
0%
-20%
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%
50%
0%
-50%
SD NW BG UK LX DN FR NL ES IE OE EA FN BD PT GR IT
Source: OECD, NTMA Workings
Note: Measured as % over or under valuation relative to long term averages since 1980.
74Banks & other
Ireland’s banks among best capitalised in
Europe – complete reverse of late 2000s
75Ireland’s Banking Sector Overview
Less competition possible
• Banks profitable before Covid-19: income, cost and balance sheet metrics much improved.
• Covid impact on asset quality has been muted so far – will need to see how market sits after fiscal policy fades
• Ulster Bank and KBC - both of which have no govt. ownership have 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 rest of 2021. The pace of shares sold will depend on
market conditions. Shares are not to be sold below a certain level. Will leave just AIB and PTSB with government involvement.
• An IPO of AIB stock (28.8%) occurred in June 2017. This returned c. €3.4bn to the Irish Exchequer. It was used for debt reduction.
Net Interest Margin Profit before Tax
3.0% 2
2.0% 1
1.0% 0
AIB BOI PTSB
0.0% -1
AIB BOI PTSB -2
2017 2018 2019 2020 2021 H1 2017 2018 2019 2020 2021 H1
Source: Annual reports of banks - BOI, AIB, PTSB 76Capital ratios strengthened in last 10 years
Bank’s balance sheets contracted and consolidated since GFC
CET 1 capital ratios (H1 2021) allow for ample forbearance in Loan-to-deposit ratios have fallen significantly as loan books
2021/22 were slashed
25% 200
20% 150
15% 100
10% 50
19.3% 17.4%
15.3% 16.4%
14.1% 15.3% -
5%
Loan-to- Loans (€bn) Loan-to- Loans (€bn)
Deposit % Deposit %
0%
CET1 % (Transitional) CET1 % (Fully Loaded) AIB BOI
AIB BOI PTSB Dec-10 Dec-20
Source: Published bank accounts
77
Note: “Fully loaded” CET1 ratios used. Refers to the actual Basel III basis for CET1 ratios.Mortgage arrears have not reversed course
We will know more on asset quality as economy fully re-opens
Mortgage arrears (90+ days) have steadily declined with no Principal Dwelling Mortgage arrears (thousands)
noticeable Covid impact
20% 12.0
8.0
15%
4.0
0.0
10%
-4.0
5% -8.0
10 11 12 13 14 15 16 17 18 19 20 21
0%
13 14 15 16 17 18 19 20 21 Over 90 days 90-180 days 181-360 days
PDH + BTL (by balance) PDH + BTL (by number) 361-720 days >720 days Total change
Source: CBI
78Commission’s ruling on Apple annulled
Further appeal by EC means case continues
• In 2016, the European Commission 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 2020, 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 or by the Commission’s decision to appeal.
79Disclaimer
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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