the irish economy-national enterprise week may 2014
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The Irish Economy: Recent
developments &
outlook
Loretta O’Sullivan
Chief Economist
Bank of Ireland
National
Enterprise
Week May 2014
Disclaimer
This document has been prepared by the Economic Research Unit at The Governor and Company of the Bank
of Ireland (“BOI”) for information purposes only and BOI is not soliciting any action based upon it. BOI
believes the information contained herein to be accurate but does not warrant its accuracy nor accepts or
assumes any responsibility or liability for such information. Any decision made by a party after reading this
document shall be on the basis of its own research and not be influenced or based on any view or opinion
expressed by BOI either in this document or otherwise. This document does not address all risks and cannot
be relied on for any investment contract or decision. A party should obtain independent professional advice
before making any investment decision. Expressions of opinion contained in this document reflect current
opinion as at 14th May 2014 and is based on information available to BOI before that date. This document is
the property of BOI and its contents may not be reproduced, either in whole or in part, without the express
written consent of a suitably authorised member of BOI.
The Governor and Company of the Bank of Ireland is regulated by the Central Bank of Ireland. In the UK, The
Governor and Company of the Bank of Ireland is authorised by the Central Bank of Ireland and the Prudential
Regulation Authority and subject to limited regulation by the Financial Conduct Authority and the Prudential
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Authority and regulation by the Financial Conduct Authority are available from us on request.
The Governor and Company of the Bank of Ireland is incorporated in Ireland with limited liability. Registered
Office - 40 Mespil Road, Dublin 4, Ireland. Registered Number - C-1.
Overview
I. Recovery underway
II. The outlook
III. Final remarks
3
Overview
I. Recovery underway
II. The outlook
III. Final remarks
4
The recovery …
5
2007
2008
2009
2010
2011
2012
2013
-8
-6
-4
-2
0
2
4
6
% (constant prices)
GDP growth
... is following the typical path for a
small open economy
6
Exports recover
Investment picks up
Employment rises
Consumer spending improves
7
Exports supported by …
35
37
39
41
43
45
2007 2008 2009 2010 2011 2012 2013
€bn (constant prices)
Exports
Pre-crisis peak
Crisis low point
c. 9% above pre-crisis peak
(seasonally adjusted)
8
… competitiveness and …
Ireland Greece
Spain
Portugal
US
Euro AreaPoland France
Italy
Germany
UK
-15
-10
-5
0
5
10
15
20
Change 2009-15,
%
Unit labour costs ↑
Unit labour costs ↓
9
… a recovery in trading partners
20
10
20
10
20
10
20
11
20
11
20
11
20
12
20
12
20
12
20
13
20
13
2013
20
14
20
14
20
14
20
15
20
15
20
15
-1
0
1
2
3
4
Real GDP,
annual change, %
Destination for c. 2/5th of Irish exports
c. 1/5th of exports c. 1/5th of exports
10
Investment has rebounded …
2007
2008
2009
2010
2011
2012
2013
-40
-30
-20
-10
0
10
20
30
Annual change, % (constant prices)
Building Machinery & equipment (excl. planes) Investment
11
… with scope for further increases …
0
5
10
15
20
25
30
35
1970 1980 1990 2000 2010
%
Investment as a share of GDP
Long run average
12
… including on the residential side
0
20
40
60
80
100
1990 2000 2010
000s of units
Residential investment
com plet ed
13
Employment is increasing …
2007
2008
2009
2010
2011
2012
2013
-9
-5
-1
3
7
0
4
8
12
16
Annual change, %
%
Employment (rhs)Unemployment Rate (lhs)
14
… and broadening out across sectors ...
-10
0
10
20
30
Ag
ricu
ltu
re
Acco
mm
od
atio
n a
nd
foo
d
Pro
fessio
na
l, s
cie
ntific a
nd
tech
nic
al
Ind
ustr
y
He
alth
an
d s
ocia
l wo
rk
Oth
er
Ed
uca
tio
n
Ad
min
istr
ative
Tra
nsp
ort
atio
n
Co
nstr
uctio
n
Info
rma
tio
n a
nd
co
mm
un
ica
tio
n
Pu
blic
ad
min
istr
atio
n
Wh
ole
sa
le a
nd
re
tail
tra
de
Fin
an
cia
l, in
su
ran
ce
an
d r
ea
l
esta
te
00
0s, a
nn
ua
l ch
an
ge
Employment by sector in Q4 2013
15
… and regions ...
0
5
10
15
20
25
30
BMW Dublin South-East South-West Mid-West Mid-East
000s, annual change
Employment by region in Q4 2013
16
… which will support consumer spending
2007
2008
2009
2010
2011 2012 2013
Q1 2014
-20
-15
-10
-5
0
5
10
Annual change, %
Consumer Spending Retail Sales
(constant prices)
Overview
I. Recovery underway
II. The outlook
III. Final remarks
17
18
Healthy order books ...
40
45
50
55
60
65
70
2012 2013 2014
Index
New Export Orders - Manufacturing PMINew Export Orders - Services PMI
> 50: expansionary territory
19
... point to stronger export growth
3.54.3
-6
-2
2
6
10
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2011 2012 2013 2014 2015
Annual change, %
Exports
(constant prices)
20
Improving business sentiment ...
0
20
40
60
80
Total Dublin Rest of Leinster Munster Connaught/Ulster
Confidence in situation facing business over the next 12 months
More Less No difference
Net49
Net40
Net48
Net47
Net59
21
... and construction activity ...
30
40
50
60
70
2012 2013 2014
Index
Construction PMI
> 50: expansionary territory
22
... supporting investment
11 11
-25
-15
-5
5
15
25
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2011 2012 2013 2014 2015
Annual change, %
Investment
(constant prices)
23
Rising confidence ...
50
60
70
80
90
2012 2013 2014
Index
Consumer Sentiment (3 month moving average)
24
... and further employment gains ...
2.2 2.0
11.5
10.4-6
-4
-2
0
2
4
10
12
14
16
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2011 2012 2013 2014 2015
Annual change, %%
Employment (rhs) Unemployment Rate (lhs)
25
... to feed through to consumer spending
1.2 1.4
-4
-3
-2
-1
0
1
2
3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2011 2012 2013 2014 2015
Annual change, %
Consumer Spending
(constant prices)
26
Positive and more balanced growth
2.43.2
-12
-8
-4
0
4
8
2008 2009 2010 2011 2012 2013 2014 2015
Annual change, %
Contributions, % pt
Net Exports
Domestic Demand
GDP
(constant prices)
Overview
I. Recovery underway
II. The outlook
III. Final remarks
27
In a nutshell
o Typical recovery path
o Broadening out of activity to continue ...
o ... supporting the labour market
o Positive growth this year & next
28
29
BOI Economic Research Unit forecasts (May 2014)
Economic Outlook 2013 (e) 2014 (f) 2015 (f)
% change unless otherwise stated
Consumer Spending -1.1 1.2 1.4
Government Spending -0.5 -2.0 -1.5
Investment 4.2 11.0 11.0
- Construction 12.5 11.7 13.4
- Machinery & Equipment -4.8 10.0 8.0
Exports 0.2 3.5 4.3
Imports 1.0 3.3 3.9
GDP -0.3 2.4 3.2
GNP 3.4 3.0 2.7
Employment 2.4 2.2 2.0
- Annual increase in numbers employed 44,000 42,000 39,000
Unemployment Rate (%, annual average) 13.1 11.5 10.4
Inflation 0.5 0.5 1.3
Thanks for your attention
30
Data sourced from the CSO, European Commission,
IMF, Department of the Environment , Community and
Local Government, Investec, Bank of Ireland, Ulster
Bank and KBC/ESRI
The latest BOI ERU Outlook on the Irish
Economy can be found at:
http://corporatebanking.bankofireland.com/fs/doc/
publications/general-publications/bank-of-ireland-
the-outlook-may-2014.pdf
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