Irish Recovery Plan
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2 Irish Recovery Plan Plan A World Economy Recovers NAMA sorts out the banking crisis Plan B No plan B?
description
Irish Recovery Plan. Plan A World Economy Recovers NAMA sorts out the banking crisis Plan B No plan B?. OECD Leading Indicators. Key US Leading Indicator. Can Recovery Be Sustained?. Yield curve slope historically been good indicator of the economic cycle - PowerPoint PPT Presentation
Transcript of Irish Recovery Plan
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Irish Recovery Plan
Plan A World Economy Recovers NAMA sorts out the banking crisis
Plan B No plan B?
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OECD Leading Indicators
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Key US Leading Indicator
US ISM Manufacturing PMI
Source: Reuters EcoWin
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul08 09 10
Ind
ex
30
35
40
45
50
55
60
65
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Can Recovery Be Sustained?
Yield curve slope historically been good indicator of the economic cycle
Recent yield curve flattening raises questions over durability of economic recovery
US 10-Year minus 2-Year Yield
Source: Reuters EcoWin
Jan06
Apr Jul Oct Jan07
Apr Jul Oct Jan08
Apr Jul Oct Jan09
Apr Jul Oct Jan10
Apr Jul Oct
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
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German Leading Indicator
German Ifo Index 2000=100
Source: Reuters EcoWin
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Ind
ex
80
85
90
95
100
105
110
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World GDP Forecasts2008 2009 2010 (f) 2011 (f)
World 3.0 -0.6 4.0 3.3
US 1.2 -2.4 3.0 2.0
Japan -0.7 -5.2 1.8 2.0
China 9.0 9.1 10.5 10.2
Eurozone 0.7 -4.1 1.9 1.3
UK 0.7 -4.9 1.6 1.7
Ireland -3.5 -7.6 -0.4 2.0
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Irish Economy
Contracted significantly more sharply than other deficit countries
GDP has posted a 14.5% real fall from peak to trough
Domestic demand down over 26% since Q4 2007
Exports the one bright spot
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Exports key to Irish recovery
Chemicals account for half of merchandise exports
Exports up 6.9% in volume terms year-on-year in H1
Goods up 4.2% and Services up 10.1%
Ireland has a higher weighting of exports in services (48%)
Dichotomy between “Modern” and “Indigenous” exports
Sterling key to performance of indigenous exports
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Still in Deflationary Territory
Irish Annual Inflation Rates
Headline HICPSource: Reuters EcoWin
Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul07 08 09 10
Pe
rce
nt
-7
-5
-3
-1
1
3
5
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Domestic demand to remain weak
Building sector out of the equation for next couple of years
House completions to total 10,000-15,000 in 2010/2011
‘Conservative’ consumer key to personal spending in the short-term
Estimated €95bn on deposit
Household savings reached €10.5bn (11% of disposable income) in 2009
Long-term average savings rate = 7%
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Housing Output
Monthly House Completions
Source: Reuters EcoWin
76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
Nu
mb
er
of
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
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Consumer Sentiment
ESRI/IIB Consumer Confidence Index
Source: Reuters EcoWin
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Index
30
40
50
60
70
80
90
100
110
120
130
140
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Consumer Spending
Retail Sales Volume Annual % Change
All Businesses All Businesses (excl. motor trades)Source: Reuters EcoWin
Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul07 08 09 10
Pe
rce
nt
-30
-25
-20
-15
-10
-5
0
5
10
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Labour Market Outlook Critical
Irish Labour Market Outlook
(Annual Average ’000) 2009 2010 (f) 2011 (f) 2012 (f)
Agriculture 96 85 85 85
Industry (incl. construction) 411 366 360 365
Services 1,422 1,400 1,395 1,420
Total Employment 1,929 1,851 1,840 1,870
Unemployment 259 289 295 280
Labour Force 2,187 2,140 2,135 2,150
Unemployment Rate % 11.8 13.5 13.8 13.0
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Addressing the public finances
Fiscal correction of 5% of GDP in 2009 and 2.5% of GDP in 2010
Further fiscal correction of at least €4bn (2.5% of GDP) in 2011
€1bn in capital spending adjustment
Other €3bn in reduced cost of public services and reform of tax system
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Issues that need to be looked at
Broadening the tax base
Property tax
Corporation tax?
Water charges
Adjusting welfare rates to make it attractive to work
Containing public expenditure
Privatisation
Stimulating economic activity
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NTMA Funding Requirements
€bn 2010 (f) 2011 (f) 2012 (f) 2013 (f)
2014 (f)
Exchequer Deficit 19 18 15 12 9
Bond Redemptions 1 4 6 6 12
Banks’ Promissory Notes 3 3 3 3 3
Total 23 25 24 21 24
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Funding Costs
Irish minus German 10-Year Bond Yield Spread %
Source: Reuters EcoWin
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
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Debt Interest as % of Tax Revenue
25.723.6
21.419.318.517.717.3
13.0
10.07.6 6.7 5.7 5.5 4.7 4.4 4.1 3.4 3.8
7.7
14.2
17.419.0 20.020.1
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10
15
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25
30
1991
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1998
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2010
2011
2012
2013
2014
Per
cent
age
Source: NTMA
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History Repeating Itself?National Debt €m % of GNP
1982 14,817 84.8
1983 18,274 95.8
1984 21,358 103.3
1985 23,492 106.0
1986 27,440 115.1
1987 30,085 117.6
1988 31,250 116.2
1989 31,525 106.8
1990 31,849 99.4
1991 32,223 96.0
1992 33,450 93.9
1993 36,006 93.5
1994 37,111 89.0
1995 38,358 82.3
1996 37,980 73.3
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Bloxham: Irish Budget Forecasts2009 2010
(f)2011 (f) 2012 (f) 2013
(f)2014 (f)
GDP % -7.6 -0.4 2.0 3.0 3.5 4.0
GNP % -10.7 -3.2 1.3 2.5 3.0 3.5
Average Inflation Rate % -4.5 -0.8 1.4 2.0 2.5 3.0
Nominal GDP Growth % -11.3 -1.0 3.2 5.5 6.0 6.5
Underlying Budget Balance (% of GDP) -14.3 -31.5 -11.0 -8.0 -6.0 -5.0
Structural Balance (% of GDP) -9.3 -9.4 -9.0 -7.0 -5.0 -4.0
Structural Primary Balance (% of GDP) -7.2 -6.5 -5.5 -4.0 -2.0 -0.5
General Government Debt % of GDP 64.5 98.6 110.0 118.0 121.0 123.0
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Not All Doom and Gloom
Record merchandise trade surplus in July (€4.2bn)
High percentage of exports in services (48%)
Corporation taxes well above target (€235m)
€95bn in household savings
New car sales (83,500) up 52% year-on-year
Net monthly flow of loans to households positive in August (first time this year)
Redundancies notified (47,600) down 21% year-on-year
Agricultural output (up three quarters running)
Demographics & Diaspora (median age of population is 35 years – lowest in EU)
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Bloxham is a Member of the Irish Stock Exchange and the London Stock Exchange. Regulated by The Financial Regulator. This publication is solely for information purposes and cannot be construed as a representation by Bloxham. The views in this report are an expression of opinion and are given in good faith, but are not guaranteed. These are subject to change without notice.
