1. The Irish Economy:
Ten Minutes on Ten Reasons To Be Positive
About the Outlook
Simon Barry
Chief Economist Republic of Ireland
February 2014

2. 1. The international environment is much less uncertain, notably in the
euro zone where Mr Draghi’s ECB has played a key stabilising role
European & US Policy-related Economic
Uncertainty Index
250
200
150
100
Source: policyuncertainty.com
Ja
n9
Ja 8
n99
Ja
n0
Ja 0
n01
Ja
n0
Ja 2
n03
Ja
n0
Ja 4
n0
Ja 5
n0
Ja 6
n07
Ja
n08
Ja
n0
Ja 9
n1
Ja 0
n1
Ja 1
n12
Ja
n1
Ja 3
n14
50
European
US
Slide 2

3. 2. Ireland’s Key Trading Partners are picking up. Growth is set to be
stronger in 2014/15 vs. 2012/13 as headwinds and uncertainties fade
Average GDP Growth, 2010-15
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
US
Source: Bloomberg, Consensus Economics
UK
2010-11
2012-13e
EZ
2014f-2015f
Slide 3

4. 3. Sluggish euro zone recovery and low inflation mean ECB rates “to
remain at present or lower levels for an extended period of time”
Mkt Interest Rate Expectations:
3-Month Euribor
6
5
4
Avg 1999-2012
3
2
1
D
ec
-9
D 8
ec
-9
D 9
ec
-0
D 0
ec
-0
D 1
ec
-0
D 2
ec
-0
D 3
ec
-0
D 4
ec
-0
D 5
ec
-0
D 6
ec
-0
D 7
ec
-0
D 8
ec
-0
D 9
ec
-1
D 0
ec
-1
D 1
ec
-1
D 2
ec
-1
D 3
ec
-1
D 4
ec
-1
5
0
Actual
29/01/2013
Current
Slide 4

5. 4. Domestic headwinds are also easing: A huge home-building
correction looks to have finally run its course...
House Completions
40
20
0
-20
-40
De
c13
De
c12
De
c11
De
c10
De
c09
D
ec
-0
8
D
ec
-0
7
D
ec
-0
6
D
ec
-0
5
D
ec
-0
4
D
ec
-0
3
-60
Source: Ecowin
3m avg, y/y%
Slide 5

6. 5. ...and the end of the fiscal correction is also now coming into view
Discretionary adjustments to ensure compliance with
fiscal rules
Assumes 0.5 percent of GDP annual adjustment in structural balance post 2015
12
10.5
Some modest loosening of
budgetary policy should be possible
from 2016 (possibly sooner?), IF
growth comes through
Billions of Euro
10
8
6.0
6
4.1
4
3.8
3.5
3.1
2.0
2
0
-2
-0.2
-0.7
-1.0
2017
2018
Source: IFAC, UB
-1.5
-4
2009
2010
2011
2012
2013
2014
2015
2016
2019
Slide 6

7. 6. Following a major adjustment effort both prior to and within the
bailout, the State has succeeded in regaining creditworthiness
%
10-Yr* Irish Govt Bond Yields
15
13
11
9
7
5
3
Source: Bloomberg
ar
-1
4
M
2
M
ar
-1
0
ar
-1
M
ar
-0
8
M
ar
-0
6
M
ar
-0
4
M
ar
-0
2
M
M
ar
-0
0
1
* 8 and 9 yr yields used where 10 yr not available
Slide 7

8. 7. Perhaps the most encouraging sign of all has been the stronger than
expected improvement in the jobs market
Breakdown of Employment,
annual change (s.a. 000s)
150
100
50
0
-50
-100
-150
13
Q
3
13
Q
1
12
3
Q
Q
1
11
Q
3
11
1
Q
Q
3
10
10
Q
1
09
3
Q
Q
1
08
Q
3
08
Q
1
07
3
Q
09
Agri, Forestry & Fishing
Total Services
12
Source: CSO, UB estimates
-200
Industry
Construction
Slide 8

9. 8. It’s also encouraging to see signs of labour market improvement
coming through across the country, with Dublin leading the way
Unemployment Rate (%)
16
14
12
10
8
6
Source: CSO
Se
p07
M
ar
-0
8
Se
p08
M
ar
-0
9
S
ep
-0
9
M
ar
-1
0
S
ep
-1
0
M
ar
-1
1
Se
p11
M
ar
-1
2
S
ep
-1
2
M
ar
-1
3
S
ep
-1
3
4
Dublin
Ex-Dublin
Slide 9

10. 9. The better jobs picture has underpinned a rebound in consumer
confidence, and some improvement in spending is starting to take hold
5
RoI Consumer Confidence and Retail Sales Volumes
(3-mth average)
70
-1
60
-4
Index
50
-7
Source: CSO KBC/ESRI
-10
40
Ja
n0
M 9
ay
-0
Se 9
p0
Ja 9
n1
M 0
ay
-1
Se 0
p1
Ja 0
n1
M 1
ay
-1
Se 1
p1
Ja 1
n1
M 2
ay
-1
Se 2
p1
Ja 2
n1
M 3
ay
-1
Se 3
p1
Ja 3
n14
% yoy
2
80
Core Retail Sales y/y (LHS)
Consumer Confidence (RHS)
Slide 10

11. 10. Overall, the economy still faces headwinds and risks of course, but growth
is poised to accelerate as both domestic and external demand pick up
Contributions to GDP Growth, % points
7
3
-1
-5
-9
Domestic Demand
Net Trade
20
15
f
20
14
f
20
13
f
20
12
e
20
11
20
10
20
09
20
08
20
07
20
06
-13
Source: CSO, UB
GDP
Slide 11

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Slide 12

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Slide 13