philip mcdonagh presentation to ni assembly & business...
TRANSCRIPT
Philip McDonagh
Presentation to NI Assembly & Business Trust
8th April 2014
Is the recovery for real?
Mr Deputy Speaker, I can report today that the economy is continuing to recover
– and recovering faster than forecast
(2014 Budget Speech)
‘ the largest upward revision to growth between budgets for at least 30 years’
UK GDP Outturn / Forecasts
0
0.5
1
1.5
2
2.5
3
3.5
4
2012 2013 2014 2015 2016 2017 2018
% Y/Y
Budget March 2013 Budget March 2014Source:OBR
+1.2pp
+0.9pp
-0.1pp -0.2pp
(Chart courtesy of Ulster Bank)
The hills are alive with the sound of recovery!
PwC
GLOBAL ECONOMIC WEATHER FORECAST – OUTLOOK FOR 2014 IS PARTLY SUNNY WITH A CHANCE OF RAIN..
dget 2014
Source: OBR for UK, PwC for others
Russia
Germany
UK
US
Brazil
India
Spain
Key
Canada
Mexico
South Africa
Australia
Japan
Italy
Greece
Ireland
France
2.3
3.0
3.2
2.0
0.6
0.9
2.1
2.7
1.7
0.4
2.8
5.4
0.2
2.7
7.5
1.5
2.2
x.x = GDP growth in 2014
China
(Chart courtesy of PwC)
Employment grew by 12,000 in 2013 NI Employee Jobs
Excludes Self-Employed
-1.0%
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
Q4 2006 Q1 2008 Q2 2009 Q1 2010 Q2 2011 Q3 2012 Q4 2013
Q/Q % Change
-4%
-3%
-2%
-1%
0%
1%
2%
3%
Y/Y % Change
Q/Q Y/Y
Source: DFP
Discontinuity in Series
(Chart courtesy of Ulster Bank)
UK Average Weekly Earnings* & CPI InflationAnnual % Change
1.3%
1.9%
0
1
2
3
4
5
6
Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16
%
Average Weekly Earnings CPI Inflation MPC Target
Income
squeeze'NICE'
Decade
Source: ONS, * Excluding bonuses
(Chart courtesy of Ulster Bank)
Incomes still rising slower than inflation
How bad was it?
Are we out of the woods or have we just reached a clearing?
What has changed since 2007?
The history of the recession
85.0
90.0
95.0
100.0
105.0
110.0
115.0
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
NIC
EI/
GD
P
Northern Ireland
Northern Ireland
Peak Q2 2007
Trough Q3 2011
Back to 2010 level
The history of the recession: UK
85.0
90.0
95.0
100.0
105.0
110.0
115.0
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
NIC
EI/
GD
P
Northern Ireland United Kingdom
UK peaks later & recovers more strongly
The history of the recession: RoI
85.0
90.0
95.0
100.0
105.0
110.0
115.0
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
Q4
Q 1 Q2
Q3
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
NIC
EI/
GD
P
Northern Ireland United Kingdom Republic of Ireland
Irish economy bottoms out earlier
What about unemployment?
2%
4%
6%
8%
10%
12%
14%
16%
2005 2006 2007 2008 2009 2010 2011 2012 2013
Un
em
plo
ym
en
t R
ate
(%
)
United Kingdom Northern Ireland Republic of Ireland
Irish jobs crisis
So what has changed since 2007? We are 7 years older and wiser…….or are we?!
Businesses slower to invest - banks cautious
Consumers more cautious……or are they?
Average house prices now 54% below their 2007 peak
Full time permanent jobs harder to find
More part time employment and self employment
Net outward migration rising
Government committed to financial austerity
Where will the growth come from?
Y = C + I + G + (X – M)
C Consumer spending Rising I Business investment Flat G Government spending Falling X-M Exports – Imports ??
Local economic forecasts 2013
(NICIE est) 2014 2015
Ernst & Young +0.6% +2.0% +2.0%
PwC +0.6% +1.9%
NICEP +0.6% +2.8% +2.9%
‘A budget for makers, do-ers and savers’
How bad will it really be?
‘As a result of the painful cuts we have made, the deficit is down by a third. That’s the good news. The bad news is: there’s still a long way to go.
We’ve got to make more cuts’
(Chancellor of the Exchequer, January 2014)
By 2018/19 there will be no deficit
Public Sector Net Borrowing (the 'underlying' deficit*)
as % of GDP
-4
-2
0
2
4
6
8
10
12
1964-65 1973-74 1982-83 1991-92 2000-01 2009-10 2018-19
PSNB
Forecasts
Source: ONS, OBR March 2014, * Excludes Royal Mail pension transfer & APF transfers
EU SGP Deficit Ceiling
(Chart courtesy of Ulster Bank)
Still one of highest deficits in the world
Government Net Borrowing as a % of GDP2014
0
1
2
3
4
5
6
7
Ger
man
y
Est
onia
Luxe
mbo
urg
Latvia
Den
mar
k
Swed
en
Bul
garia
Aus
tria
Rom
ania
Gre
ece
Lith
uania
Finland
Italy
Eur
o are
a
Bel
gium
Malta
EU
Cze
ch R
ep.
Hun
gary
Net
herla
nds
Slo
vakia
Slo
venia
Franc
e
Por
tuga
l
Ireland
Pol
and
UK
Cyp
rus
Spa
in
% of GDP
€
EU Stability & Growth Pact Annual Deficit Ceiling
Source: European Commission Winter Forecast February 2014 & OBR March 2014.
(Chart courtesy of Ulster Bank)
The cuts haven’t really hit us yet
7500
8000
8500
9000
9500
10000
10500
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
£mil
lio
n
NI Resource DEL
RDEL March 2011 Latest RDEL
…but look what’s ahead
Change in Departmental DEL Spending in Real Terms
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
Annual Average
2011/12 to 2015/16
2016/17 2017/18 2018/19
%
DEL Resource DEL Capital DEL
Source: OBR March 2014
(Chart courtesy of Ulster Bank)
The challenges for government and business Managing public sector reform – ‘its not the size of the
public sector that matters its making it more modern and efficient’
Productivity – the forgotten word?
Exporting more or becoming more competitive?
How do we fund a more ambitious apprenticeship programme?
Can we fund public sector infrastructure with alternative finance?
Fiscal powers?
