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Irish Recovery Plan

Irish Recovery Plan. Plan A World Economy Recovers NAMA sorts out the banking crisis Plan B No plan B?. OECD Leading Indicators. Key US Leading Indicator. Can Recovery Be Sustained?. Yield curve slope historically been good indicator of the economic cycle

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Irish Recovery Plan

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  1. Irish Recovery Plan • Plan A • World Economy Recovers • NAMA sorts out the banking crisis • Plan B • No plan B?

  2. OECD Leading Indicators

  3. Key US Leading Indicator

  4. Can Recovery Be Sustained? • Yield curve slope historically been good indicator of the economic cycle • Recent yield curve flattening raises questions over durability of economic recovery

  5. German Leading Indicator

  6. World GDP Forecasts

  7. Irish Economy • Contracted significantly more sharply than other deficit countries • GDP has posted a 14.5% real fall from peak to trough • Domestic demand down over 26% since Q4 2007 • Exports the one bright spot

  8. Exports key to Irish recovery • Chemicals account for half of merchandise exports • Exports up 6.9% in volume terms year-on-year in H1 • Goods up 4.2% and Services up 10.1% • Ireland has a higher weighting of exports in services (48%) • Dichotomy between “Modern” and “Indigenous” exports • Sterling key to performance of indigenous exports

  9. Still in Deflationary Territory

  10. Domestic demand to remain weak • Building sector out of the equation for next couple of years • House completions to total 10,000-15,000 in 2010/2011 • ‘Conservative’ consumer key to personal spending in the short-term • Estimated €95bn on deposit • Household savings reached €10.5bn (11% of disposable income) in 2009 • Long-term average savings rate = 7%

  11. Housing Output

  12. Consumer Sentiment

  13. Consumer Spending

  14. Labour Market Outlook Critical

  15. Addressing the public finances • Fiscal correction of 5% of GDP in 2009 and 2.5% of GDP in 2010 • Further fiscal correction of at least €4bn (2.5% of GDP) in 2011 • €1bn in capital spending adjustment • Other €3bn in reduced cost of public services and reform of tax system

  16. Issues that need to be looked at • Broadening the tax base • Property tax • Corporation tax? • Water charges • Adjusting welfare rates to make it attractive to work • Containing public expenditure • Privatisation • Stimulating economic activity

  17. NTMA Funding Requirements

  18. Funding Costs

  19. Debt Interest as % of Tax Revenue

  20. History Repeating Itself?

  21. Bloxham: Irish Budget Forecasts

  22. Not All Doom and Gloom • Record merchandise trade surplus in July (€4.2bn) • High percentage of exports in services (48%) • Corporation taxes well above target (€235m) • €95bn in household savings • New car sales (83,500) up 52% year-on-year • Net monthly flow of loans to households positive in August (first time this year) • Redundancies notified (47,600) down 21% year-on-year • Agricultural output (up three quarters running) • Demographics & Diaspora (median age of population is 35 years – lowest in EU)

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