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Economic Developments and Outlook for Ireland
Section 1 Macroeconomic Developments
Section 2 Macroeconomic Outlook
Section 3 Developments in the Public Finances
Economic growth in Ireland’s key trading partners slowing...
3
Sources:
1. GDP: US: Bureau of Economic Analysis; UK: Office for National Statistics; Euro Area: Eurostat
2. PMI: Markit
Composite PMI (right)US GDP (left) EA GDP (left) UK GDP (left)
40
42
44
46
48
50
52
54
56
58
60
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Q1 Q3 Q1 Q3 Q1 Q3
2014 2015 2016
q-o
-q %
ch
ange
US
40
42
44
46
48
50
52
54
56
58
60
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
Q1 Q3 Q1 Q3 Q1 Q3
2014 2015 2016
UK
40
42
44
46
48
50
52
54
56
58
60
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
Q1 Q3 Q1 Q3 Q1 Q3
2014 2015 2016
Ind
ex
Euro Area
Key points
• US, Euro area and UK growth slowing.
• Impact of Brexit vote still unfolding.
4
Underlying exports remain strong in H1…
Source: CSO, DoF calculations
-10
-5
0
5
10
15
20
25
30
35
40
45
2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2
Contribution to export growth
Trade Data Exports Service Exports Contract Manufacturing
Key Points
• Export growth while still robust, has moderated reflecting the slowdown in global trade and depreciation of sterling in the first half of the year.
• Contract manufacturing now acting as a drag on headline export growth.
5
Investment cycle has led domestic recovery…
Source: CSO
-20
-10
0
10
20
30
40
50
Contributions to Investment, pp
B&C Core M&E Aircraft Intangibles GDFCF
Key Points
• Investment remains strong driven by investment in intangibles and building and construction.
6
Consumer spending robust in the first half of 2016…
Source: CSO, VISA/Markit
0
1
2
3
4
5
6
7
8
9
10
2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 Jul-Aug
y-o
-y c
han
ge
Core retail All retail Visa indexKey Points
• Retail Sales robust in 2016, up 5.2 per cent to end-August y-o-y.
• Supported by strong car sales –new cars licensed for the first time up almost 20 per cent to end September (y-o-y).
7
Highest employment volumes since 2009...
Source: CSO QNHS
7.5
8.0
8.5
9.0
9.5
10.0
10.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Q1 Q2 Q3 Q4 Q1 Q2
2015 2016
Un
emp
loym
ent
rate
emp
loym
ent
gro
wth
, y-o
-y
Employment
Key Points
• Employment levels have increased by 10 per cent since the low-point in 2012 (+ 180,000 jobs).
• Growth remains broad based with all sectors posting employment gains relative to trough levels.
• The number of unemployed people continues to decline, falling to 172,900 in September.
8 | OUTLOOK 2015
Unemployment now below euro area average…
Key Points
• The unemployment rate has fallen by over 7pp since early 2012, and is well below the euro-area average of 10.1 per cent.
• Unemployment rate of 7.9 per cent recorded in September 2015.
Source: CSO
9
The drag on inflation from falling energy prices is starting to fade….
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Co
ntr
ibu
tio
ns
(%)
unprocessed food processed food NEIG energy
services HICP Core HICP
Headline vs Core HICP Annual Inflation - Breakdown
Key Points
• As measured by the HICP, the price level is 0.4 per cent lower compared to August 2015.
• Core HICP inflation (which excludes unprocessed food and energy prices) was up 0.8 per cent on average this year.
Source: Eurostat
Section 1 Macroeconomic Developments
Section 2 Macroeconomic Outlook
Section 3 Developments in the Public Finances
11
Year-on-year % change 2015 2016 2017 2018 2019 2020 2021GDP 26.3 4.2 3.5 3.4 3.2 2.8 2.6GNP 18.7 7.5 3.3 3.2 3.0 2.6 2.4
Nominal GDP 32.4 2.8 4.5 4.6 4.5 4.2 4.1
Personal Consumption 4.5 3.3 2.9 2.2 1.8 1.5 1.3Govt Consumption 1.1 5.9 2.4 1.3 1.0 0.9 0.9Investment 32.7 15.8 6.0 4.7 4.3 3.5 3.4Exports 34.4 3.6 4.5 4.8 4.7 4.2 4.0
Imports 21.7 5.9 5.1 4.8 4.5 4.1 3.9
HICP 0.0 -0.1 1.3 1.8 1.9 1.9 1.9
GDP Deflator 4.9 -1.3 1.0 1.1 1.2 1.4 1.5Employment 2.6 2.6 2.1 2.1 1.8 1.6 1.4
Unemployment (rate) 9.5 8.3 7.7 7.3 6.9 6.5 6.1
Contributions to growth (p.p)*
Domestic Demand 8.9 5.1 2.8 2.1 1.9 1.6 1.5Change in Stocks -0.8 0.1 0.0 0.0 0.0 0.0 0.0
Net Exports 18.3 -1.0 0.7 1.3 1.4 1.2 1.1
Budget 2017- Macroeconomic Outlook…
* Rounding may affect totals
Section 1 Macroeconomic Developments
Section 2 Macroeconomic Outlook
Section 3 Developments in the Public Finances
Tax performance year to date…
Key points
• Tax receipts of €33,408 million to end Q3, up €1,788 million (5.7%) year-on-year and up €484 million (1.5%) on profile).
• Strong year-on-year growth across all main tax heads.
• Corporation tax driving over performance against profile.
• Forecast for tax receipts in 2016 is now €48,135 million, over €900 million than forecast in Budget 2016.
13Strictly private and confidential
0 2 4 6 8 10 12 14
Income Tax
VAT
Excise Duties
Corporation Tax
Other
Tax revenue to end-September 2016
Profile Outturn
On-going improvement in the general government deficit…
14Strictly private and confidential
-8.7%
-8.0%
-5.6%
-3.7%
-1.0% -0.9%-0.4% -0.3%
0.2%0.7%
1.1%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
2011 2012 2013 2014 2015 2016f 2017f 2018f 2019f 2020f 2021f
% o
f G
DP
Underlying general government deficit
Key Points
• Deficit is forecast as 0.9% of GDP for 2016, improving to 0.4% of GDP for 2017.
• General government surplus is forecast for 2019.
Debt ratio continues to decline
15Strictly private and confidential
0%
20%
40%
60%
80%
100%
120%
140%
2009 2010 2011 2012 2013 2014 2015 2016f 2017f 2018f 2019f 2020f 2021f
% o
f G
DP
General Government DebtKey points
• Debt ratio peaked in 2012 and 2013.
• Significant decline in the debt ratio in 2015 primarily due to the large revision to 2015 GDP in the July 2016 National Accounts.
• Decline in debt ratio expected to continue over the forecast horizon.
• Net debt at end 2015 was 66.9% of GDP.
Yields on Irish Debt
16Strictly private and confidential
Key Points
• Irish yields have stayed steady through 2016, trading below 1% for most of the year.
• 10-year yield is down from a peak of 14% in July 2011.
• A rating from all main rating agencies.
Budget 2017 fiscal forecast
17Strictly private and confidential
2015 2016 2017 2018 2019 2020 2021
General government balance (% of GDP)
-1.9 -0.9 -0.4 -0.3 0.2 0.7 1.1
General government primarybalance (% of GDP)
0.7 1.4 1.8 1.8 2.1 2.4 2.6
Structural Budget Balance (% of GDP)
-2.2 -1.9 -1.1 -0.5 0.0 0.6 1.1
Debt-to-GDP ratio 78.6 76.0 74.3 72.7 70.2 65.8 63.0
Fiscal Rules
• Budget 2017 is the second budget framed under the preventive arm of Stability and
Growth Pact.
• Budget 2017 is compliant with the Preventive Arm of SGP.
• Having corrected the excessive deficit in 2015, the new fiscal anchor is to achieve the
Medium Term Budgetary Objective (MTO) of balanced budget, defined as a deficit of
0.5 % of GDP in structural terms.
• The MTO is forecast to be achieved in 2018.
18Strictly private and confidential
Department of Finance
Government Buildings
Upper Merrion Street
Dublin 2
Ireland
www.finance.gov.ie
@IRLDeptFinance
This presentation is for informational purposes only.
No person should place reliance on the accuracy of the data and should not act solely on the basis of the presentation itself.
The Department of Finance does not guarantee the accuracy or completeness of information which is contained in this document and which is
stated to have been obtained from or is based upon trade and statistical services or other third party sources. Any data on past performance
contained herein is no indication as to future performance.
No representation is made as to the reasonableness of the assumptions made within or the accuracy or completeness of any modelling, scenario
analysis or back-testing.
All opinions and estimates are given as of the date hereof and are subject to change.
The information in this document is not intended to predict actual results and no assurances are given with respect thereto.
