Rossa White, How Ireland Returned to the Market May 2013

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Rossa White, How Ireland Returned to the Market May 2013

  1. 1. HOW IRELAND RETURNED TO THE MARKETIreland has met all of its “Programme” targets, will have a primarybudget surplus again in 2014 and is near the top of the growth leagueRossa White, Chief Economist, National Treasury Management AgencyMay 24th20131
  2. 2. Irish bond market recovery continues in 2013 (yld:%)Source: Bloomberg (weekly data)2
  3. 3. Ireland not far from confirming debt sustainability:primary surplus (% of GDP) to be achieved by 20143Source: Department of Finance; Eurostat; NTMAIn 2014:Average interest rate on GG debt: 4.1%Nominal GDP growth: 3.8%Starting GG debt position: 123% of GDPTherefore, debt stabilising primary balance: +0.4% of GDPIreland’s forecast primarybalance comfortably in line withdebt stabilising primary balance
  4. 4. Ireland is the only troubled country to outperform itsGovernment deficit target for two straight years4Sources: European Commission Stability Programme Updates for Ireland (2012) Italy (April 2011) and Spain (April 2011);Council Recommendation on Portugal’s 2012 National Reform Programme (May 2012); Economic AdjustmentProgramme for Greece – Fifth Review (October 2011); Eurostat - Supplementary Tables for the Financial CrisisGeneral Government Balances ex capital injections to support fin institutions (% of GDP)
  5. 5. Growth patterns reveal a faster correction in Irelandand more favourable backdrop in recent years5Source: Eurostat Source: EurostatReal GDP Growth (% change year-on-year) Real GDP Growth (% change year-on-year)
  6. 6. Ireland is expected to rank among fastest growingeconomies in the euro area for 2013 and 20146Source: European Commission
  7. 7. A pronounced recovery in competitiveness is visibleeven when controlling for changes in the economy7Source: ECB Source: BruegelHarmonised competitiveness indicators(CPI deflated, Base: Jan 2002=100)Note: Data available to Q4 2011 and using fixed weightsfrom Q1 2008Real effective exchange rates using fixedsectoral weights still show marked recovery
  8. 8. Labour market improving, driven by private sectorEmployment growth for two successivequarters stems the recent declineUnemployment rate falls over threeconsecutive quarters8Source: CSO Source: CSO
  9. 9. 9Household debt burden remains high, yet risingdisposable incomes help to speed up deleveragingSources: CSO and Central Bank of IrelandNote: AGDI = Actual Gross Disposable Income of households
  10. 10. New investment will eventually recover, but when?10Source: CSO; NTMA

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