#1pwc Ireland: Supports and surplus heading in uncertain winter NTMA Investor Presentation October 2022 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency#2Index Summary - Page 3 Macro - Page 8 Fiscal - Page 21 NTMA Funding - Page 30 ESG Sustainability - Page 41 Structure of Irish economy - Page 52 Brexit - Page 59 Property & banks - Page 65 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 2#3Summary Irish economic resilience clear in labour market and tax data Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 開 ☐ ☐ B#4y-o-y% Domestic economic recovery evident Ukraine conflict/inflation/tightening monetary policy likely to impact growth Domestic demand* gives better picture of 30 25 recent economics swings Unemployment is low again - labour market back close to full employment Value added from ICT & pharma has given Ireland resilience 250 200 150 100 35 30 20 15 10 25 20 EUR, billion 15 10 50 -5 -10 -15 5 0 2000 2005 2010 2015 2020 0 I I 2005 2010 2015 2020 2000 2005 2010 2015 2020 GVA: Domestic sectors GDP - Domestic Demand - Unemployment rate GVA: Multinational dominated sectors Source: CSO Source: CSO Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency * Domestic demand series accounts for multinational activity and known as modified final domestic demand (excludes inventories) Source: CSO 4#5Government set for surplus this year Debt to GNI* to fall again in 2022 Forecasted 2022 GG surplus of 0.4% of GNI* after revenue strength 10 do -5 -10 -15 -20 I I I Debt position temporary reversed by Covid response Debt to GNI* to fall below 90% in 2022 after strong economic recovery 175 Debt-to-GNI* (101% 2021; 95% in 2019) 150 125 Debt-to-GG Revenue (243% 2021; 232% in 2019) 100 do 75 Average interest rate 50 (1.5% 2021, from 2.2% in 2019) 25 0 Debt-to-GDP^ (55% 2021, from 57% in 2019) 2000 2010 2020 Debt-to-GNI* Debt-to-GDP 1995 2000 2005 2010 2015 2020 2025 GGB (% GNI*) Primary Balance (% GNI*) Source: CSO, Irish Department of Finance forecasts Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency ^ Debt to GDP is not an appropriate metric to use for Ireland Source: NTMA, CSO, Irish Department of Finance forecasts 5#6Medium term economic challenges Recovery amid energy price shocks, global slowdown and broadening inflation Growth Real consumption was strong in Q2. Direct exposure to Ukraine conflict is limited but indirect impact on energy costs will increasingly be a factor. Labour market strength gives comfort Fiscal Deficit set for surplus in 2022 as economic recovery buoys revenues. Heading into uncertain period in good fiscal shape Spending on cost-of-living measures announced in Budget 2023 Inflation High inflation in Ireland similar to any other developed economy Inflation and rate hikes will slow growth momentum but Ireland enters uncertain phase in full employment Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency CO 6#72022 funding complete at €7bn Revenue strength meant funding came in below original funding range of €10-14bn Cash Improving fiscal position alongside NTMA's strategy of prefunding means Ireland has a strong cash position This affords the NTMA a large degree of flexibility >10 years Weighted average maturity of debt one of longest in Europe NTMA issuance since 2020 has a weighted average maturity of 12.8 years AA- Ireland rated in the AA- category with nearly all major rating agencies Despite Covid impact, Fitch and DBRS upgraded their rating for Ireland to AA space. Moody's upgraded to A1 (positive outlook) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 7#8Macro Data show domestic recovery but real consumption hit by energy prices Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 開 ☐ ☐ 8#9y-o-y% Ireland performing relatively well Modified domestic demand gives the best guide 13 Modified Domestic Demand and GVA (excluding foreign- owned MNEs) place growth at 5-6% last year 18 Irish MDD bounced back in Q2 2022 (4.3% q-o-q) and better than euro area on similar metrics* 30 20 10 8 3 y-o-y % 0 -10 -3 -20 -8 -30 I | I 1 I MDD GVA^ GNI* GDP 2017 2018 2019 2020 2021 2022 2021 2020 2019 - Ireland United States United Kingdom - Euro Area Source: CSO Source: CSO, BEA, ONS, Eurostat Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Note: MFDD for Ireland is modified for multinational activity by Ireland's Central Statistics Office (CSO). MDD = Consumption + Government (current) spending + Modified Investment. ^ GVA excluding foreign multinational enterprises 9 * *Series for US, UK and Euro area = Consumption+ Government spending + Domestic investment#10Growth expected for Ireland in 2022 Q2 MDD data rebounded after disappointing Q1, PMIs show slowdown like elsewhere Government forecasts growth could be 7.7% in 2022 but there are obvious downside risks for H2 Ireland's Composite PMI better than euro area for some time but slowdown is becoming evident 70 Annual Growth Quarterly Growth Q2 vs Q2 2021 Q2 vs Q1 2022 GDP MDD 11.1 1.8 10.6 4.3 Consumption 5.6 1.8 Gov't Spending 2.6 2.7 Index BNWB 52 5 60 50 40 30 20 10 Mod. Investment 33.3 11.4 Employee Compensation 12.2 2.5 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO . 1 J 2019 2020 2021 2022 - Ireland United States Euro Area Source: IHS Markit 10#11Labour market strength evident in 2022 Unemployment rate well below pre-pandemic levels Unemployment rate at 4.3% in September - full employment position achieved 35 30 25 20 % do 15 10 0 | I 2000 2005 2010 2015 2020 - Unemployment rate Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO Index, Q4 2019 = 100 Employment growth exceptional for MNC firms; pandemic- affected sectors at pre-Covid levels 115 105 95 85 75 Q4 Q1 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2020 2021 - ICT + Industry (incl Pharma) - Other Pandemic sectors - - Total 2022 Source: CSO **Unemployment rate series shown uses the Covid adjusted unemployment rate between March 2020 and Feb 2022 and the standard unemployment rate elsewhere. 11#12Nearly all sectors back above 2019 level Next quarters critical for wage-price spiral concerns Job gains broad-based, with female employment up 10.0% compared to pre-pandemic, vs 4.6% for males Q2 2022 vs Q4 2019 Earnings data remain positive, but pandemic-related issues still evident in measures of labour costs ICT Health Industry Prof, sci, tech Education Construction Fin, ins, RE Wholesale/retail Public admin Transpo & storage Ag, fish, forestry Admin serv Other Hotel & rest 6 No. of Persons -5000 5000 15000 25000 35000 7 5 Male Female Source: CSO Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency y-o-y % m 1 -1 -3 I I I 2010 2012 2014 2016 2018 2020 2022 - Average hourly earnings Average hourly total labour costs Source: CSO 12#13External environment concerning Central banks removing extraordinary stimulus as global slowdown expected EA Monetary Policy 2021 2022 Purchases ended; Rate normalisation Expansionary Move to >3.5% policy rate expected EUR, billion Ireland price taker on Oil/Gas: €7bn (3.5% of MDD) spent on fuel imports in Jan - July 2022, greater than all of 2021 Max accommodative 4.0 EU Fiscal Policy Expansionary 3.5 3.0 US Monetary Policy Max accommodative 2.5 2.0 US growth Rebound Decelerating growth 1.5 Oil price Rising Elevated 1.0 0.5 UK growth Rebound Decelerating growth 0.0 I Decelerating Euro Growth Rebound growth, energy supply/costs Global Inflation Rising Elevated in 2022 2006 2008 2010 2012 2014 2016 2018 2020 2022 - Gas imports (6mth rolling) - Petroleum imports (6mth rolling) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO 13#14Index, 2019 average = 100 Nominal Spending up: real spending flat Inflation is now clearly eating into real consumption Card spending data* show a strong start in 2022 compared to average spending in 2019 (nominal data) 140 130 120 110 100 90 80 70 60 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec - 2020 2021 2022 Index, Q4 2019 = 100 High-inflation environment hitting real consumption as divergence between real and nominal spending widens 115 110 105 100 95 90 85 80 Q4 Q1 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2020 2021 2022 2019 - Real Personal Consumption Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Central Bank of Ireland * CBI spending data is nominal data and not seasonally adjusted - - Nominal Personal Consumption Source: CSO 14#15Inflation at 8.6% in Ireland Energy and pandemic are big drivers but core inflation also elevated Energy prices driving a proportion of headline inflation but core measure also elevated Goods inflation impacted by energy prices - services inflation could be stickier 10 8 53 do 3 0 -3 -5 2005 2010 2015 2020 - HICP- Core HICP Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Eurostat 10 8 60 d 4 2 0 I I T 2015 2016 2017 2018 2019 2020 2021 2022 | Goods Services - All items Source: CSO 15#16Inflationary pressure broadening Re-opening and energy evident in inflation index Biggest pick-up in inflation concentrated in energy and Covid- hit sectors CPI inflation by COICOP divisions Inflation is broadening: 50% of products in CPI basket are seeing >5% annual inflation All Items Food & Non-Alcohol Alcohol & Tobacco Clothes & Footwear Housing & Utilities Furnishings, & HH Equip Health Transport Communication Recreation & Culture Education Restaurants & Hotels Misc Goods & Services y-o-y % -10 -5 0 5 10 15 20 100 90 25 25 80 70 60 do % 50 40 30 20 10 01 2015 2016 2017 2018 2019 2020 2021 2022 <0% 0-2% 12-3% 3-5% >=5% ▲ 1 year ago • 3 year average August 2022 Source: CSO Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Note: RHS shows distribution of annual inflation rates across all CPI items (unweighted). Source: CSO 16#17Sustained inflation an obvious risk Phillips curve historically has held in Ireland Inflation expectations picking up for consumers and businesses Philips curve has held in Ireland in recent past and unemployment is below 5% 40 do 20 80 60 80 10 60 48° wwwwww. 0 2 0 -20 Nominal COE growth per head* N + 6 00 Covid outliers 2022 forecast range I I 2014 2016 2018 2020 2022 -2 I I I I I I I I I - Consumer expectations, Ihs Industry expectations, lhs Services expectations, Ihs -Headline inflation, rhs 2 4 6 8 10 12 14 16 18 20 22 Unemployment rate Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: DG ECFIN, Eurostat * Excludes agriculture incomes Source: CSO, Eurostat 17#18y-o-y %, 4Q MA Investment is rebounding strongly Modified investment well up on pre-pandemic but likely bolstered by one-off factors Computer hardware investment, data centres and new dwelling construction driving modified investment Irish investment since pre-pandemic has strengthened comparatively in recent quarters ༠ཋ °ŞR¥ -10 -20 -30 -40 I I I I 2000 2005 2010 2015 2020 Investment Building & Construction Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Index, Q4 2019 = 100 125 115 105 95 85 75 Q4' Q1 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2020 2021 2022 Investment ex B&C -Ireland - United Kingdom United States - Germany France Source: CSO Source: CSO, BEA, DESTATIS, ONS, INSEE Note: Ireland metric is modified investment, which strips out multinational activity 18#19% of GNI* Households balance sheets improved Debt levels much lower coming into pandemic + new Covid savings Legacy of 2008-12 financial crisis and Covid is on Government not private balance sheets Gross HH saving rates have jumped in Ireland more than in most countries due to forced savings/income supports 30 200 175 150 135 129 110 125 100 75 50 25 01 71 il 61 64 44 Household debt SME debt 51 35 16 12003 2008 2013 2021 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 157 101 Public debt Source: Central Bank of Ireland, Eurostat, CSO Savings % of disposable income, 4Q MA 25 20 15 10 5 0 T | I T 2005 2010 2015 2020 - Ireland Euro Area 19 - - United Kingdom Source: CSO, ONS, Eurostat Note: Gross Savings as calculated by the CSO has tended to be a volatile series, some caution is warranted when interpreting 19 this data#20OECD's BEPS process may impact FDI offering Ireland signed up to agreement; implementation has been delayed to 2024 at earliest Pillar One: proposal to re-allocate taxing rights on non- routine profits ▸ Over 130 countries have signed on for the BEPS 2.0 two- pillar set of reforms. The first pillar focuses on proposals that would re-allocate some taxing rights between jurisdictions where companies reside and the markets where user/consumers are based. ▸ Under such a proposal, a proportion of profits would be re- allocated from small countries to large countries. Pillar 1 will reduce Ireland's corporation tax base. Some estimates place the hit at up to €2bn per annum by the middle of the decade. Ireland has always been fully supportive of Pillar One despite the implied cost to the Exchequer. Pillar Two: 15% minimum effective global tax rate ▸ Countries will introduce a minimum effective tax rate with the aim of reducing incentives to shift profits. ▸ Where income is not taxed to the minimum level, there will be a 'top-up' to achieve the minimum rate of tax. ▸ Ireland had reservations on the minimum tax rate proposal but signed up after further clarity was given. ▸ The minimum rate is greater than the 12.5% rate that Ireland levies and thus some of Ireland's comparative advantage in attracting FDI will be lost. ▸ Ireland can lean on other positives; educated and young workforce, English speaking, EU access, and ease of doing business ▸ At 15% corporate tax rate, Ireland's rate remains one of the lowest in the EU. Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 20 20#21Fiscal Surplus expected on back of strong revenue growth Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 開 ☐ ☐ 21#22Ireland set for surplus in 2022 Recovery in fiscal position in just three years - thanks to strong revenues Response GG Deficit was large in 2020 at €19bn but fell to €7.1bn in 2021 (3.1% of GNI*). Govt. forecasts a small surplus of €1bn (0.4% of GNI*) in 2022 Revenues Ireland's economic structure has meant revenues have rebounded strongly. Strength of both Corporate and Income tax revenues from multinational sectors has helped buoy government finances Debt Debt ratios increased due to Covid with modest jump in 2021 for debt to GNI* End-2021 ratio at 101%. Ratio will fall closer to pre- pandemic levels by end- 2022 (c. 95%) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 22 22#23Ireland set for surplus in 2022 Robust revenues mean surplus is forecasted a year ahead of schedule Gen. Govt. surplus expected in 2022, 0.4% of GNI* 10 10 5 0 Revenues strong in 2022; income tax and VAT important but corporate tax exceptionally strong^ (end-August) 70 10 50 do 30 Jo -5 -10 2022F -15 GGB % of GNI* 0.4% -20 | T I T 1995 2000 2005 2010 2015 2020 2025 10 -10 2022 vs 2021 YTD Income Tax VAT Excise Revenues Corporation Expenditure Source: CSO, Irish Department of Finance forecasts Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency ^CT receipts growth unusually large but expected to be c. 37% for year-end Source: Irish Department of Finance 23 23 LHS chart: Underlying GG and primary balance numbers used (excludes banking recapitalisations during GFC) GGB (% GNI*) == Primary Balance (% GNI*)#242022 GG Balance (forecast, % of GDP or GNI*): Ireland's estimated figure at 0.4% of GNI Surplus compares well to others in EA Recovery in fiscal position evident LO 3 4 5 6 ୪୧ United States Malta Italy Belgium Spain France Lithuania Estonia Slovenia Greece United Kingdom Euro Area Bulgaria Slovakia Austria Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Forecasts for other countries taken from European Commission Summer Forecasts Source: DG ECFIN, Irish Department of Finance Netherlands Germany Finland Portugal Sweden Cyprus Luxembourg Switzerland Ireland (GNI*) Denmark 24 24#25Budget 2023 announces €11bn in measures Mix of permanent measures and one-offs equate to 4.2% of GNI* Permanent budget measures amounted to €6.9bn and one- off cost of living measures amounting to €4.1bn Spending Core One-off tax measures Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Temporary Taxation Business energy supports Source: Irish Department of Finance ▸ The one-off measures include: ▸ Households will receive €600 in electricity credits. ▸ Double child benefit payment in Q4 ▸ Other lump sum welfare payments ▸ Businesses receive up to €10K a month for energy bills. ▸ The permanent measures include: ▸ Tax band for highest income rate of 40% rising from €36.8K to €40K (€1.2bn cost). ▸ Increases to pension and unemployment payments. ►25% cut to childcare costs & college fees will be reduced. ▸ GG expenditure to increase by 4.8% in 2022. Excluding Covid spending, "core" expenditure will increase by 9.1% (& 6.3% for 2023). Both above the 5% spending rule the Government aims for. Plan to revert to its 5% rule in 2024. 25 25 7 896543210#26€ billion, cumulative Corporate tax receipts growing strongly New measure of underlying GGB which excludes "windfall corporate tax" published Corporation tracking for €21bn in 2022 after strong Q1-Q3, easily eclipsing last year's total 18 15 13 10 Underlying GGB measure suggests Ireland would reach surplus by 2024 8 3 -3 -8 3 -13 0₁ I I I I I Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -18 I | | | I I 1995 2000 2005 2010 2015 2020 2025 - 2015 2017-2019-2021 2016 2018-2020-2022 Source: Irish Department of Finance GGB (% GNI*)= Underlying GGB (% GNI*) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO, Irish Department of Finance forecasts 26 Note: The Department of Finance's underlying general government balance is the GGB excluding the Government's estimated windfall corporation tax receipts (windfall estimated at €9bn for 2022).#27GG debt to GNI* to fall below 90% in 2022 Debt 101% of GNI* in 2021 and expected to fall as growth and fiscal position both help 175 150 125 100 do % 75 50 25 0 | | | I | | 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Debt-to-GNI* Debt-to-GDP Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: NTMA, CSO, Irish Department of Finance forecasts 27 27#28The "i-g" snowball effect in Ireland's favour Low interest rates coupled with high nominal growth underpins debt dynamics With low rates locked in, Ireland's "hurdle rate" for a positive Histogram of Ireland's recent growth history (2002-2021) snowball effect is low 20 15 10 -5 -10 -15 Number of years 8 765432 1 O -20 0 I I 1995 2000 2005 2010 2015 2020 2025 - Average interest rate Growth (GNI*) ■ i -g Source: CSO, Irish Department of Finance forecasts, NTMA analysis Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Nominal GNI✶ grew by more than 4% in 15 of last 20 years <-8% -6-4% -4-2% -2-0% 0-2% 2-4% GNI* Annual growth rates GDP GG Revenue 4-6% 6-8% 8-10% 10-12% 12%+ Source: CSO, NTMA analysis 28 828#29Alternative Debt Metrics Need to assess other metrics apart from debt to GDP when analysing debt sustainability 2021 GG debt to GG revenue % GG interest to GG revenue % GG debt to GDP % Greece Italy 391 5.0 193 312 7.3 151 Portugal 281 5.4 127 Spain 271 5.0 118 Cyprus 244 4.3 104 Ireland 239 3.3 55 (101 GNI*) UK 227 5.5 85 Belgium 219 3.4 108 France 214 2.6 113 EA 19 202 3.1 96 Slovenia 170 2.9 75 Austria 166 2.2 83 Slovakia 155 2.7 63 EU 27 147 3.6 88 Germany 145 1.2 69 Netherlands 119 1.3 42 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 52 Source: Eurostat, CSO 29 29#30NTMA Funding Funding complete for the year Continued flexibility in strategy due to cash balances and long average life Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 開 ☐ ☐ 30#312022 funding complete at €7bn Revenue strength meant funding came in below original funding range of €10-14bn Cash Improving fiscal position alongside NTMA's strategy of prefunding means Ireland has a strong cash position This affords the NTMA a large degree of flexibility >10 years Weighted average maturity of debt one of longest in Europe NTMA issuance in 2020/21 had a weighted average maturity of 12.8 years AA- Ireland rated in the AA- category with nearly all major rating agencies Despite Covid impact, Fitch and DBRS upgraded their rating for Ireland to AA space. Moody's upgraded to A1 (positive outlook) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 31#32€ billion 0 High level of flexibility in NTMA issuance plans Helped by smoother maturity profile 25 20 22 15 10 10 5 ST 2022 2023 2024 2025 2026 Bond (Fixed) EFSM 2027 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency il 2028 2029 EFSF Bond (Floating Rate) Green 2030 2031 2032 2033 2034 2035 2036-40 2041-45 2046-50 2051-53 Other (incl. SURE) Source: NTMA 2054+ 32 32#33€ billions 30 20 10 Lower supply expected in coming years Ireland has low redemptions compared to rest of Europe Current borrowing requirements suggest NTMA issuance won't match recent past in coming years (€bns) 70 60 50 40 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 0 Issuance (2019-2021) Redemptions + EBR (2022- 24) Ireland's refinancing risk is low - only a third of debt is set to mature in the next five years 80% 70% 60% 50% 40% 30% 20% 10% 0% ESM Source: NTMA, Budget 2023 forecasts Refinancing Risk 5Y Refinancing rate defined as debt maturing within five years divided by total debt outstanding Source: NTMA Spain Syprus Slovenia Ireland Estonia EU (issuer) Greece 333#34€ billions Borrowing costs anchored Ultra low rate era may be over but Ireland used the period well NTMA issued €42.5bn MLT debt 2020/21 at 12.8 yr. weighted Vast majority of Irish debt is fixed rate at average cost of 1.5% maturity and avg. rate 0.19% 6 45% 30 5.5 40% 5 25 3.9 20 2.8 35% 30% 4 25% 3 do 20% 15 10 15% 1.5 0.8 0.9 5 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Syndication, Ihs Average yield, rhs Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Auction, Ihs Source: NTMA Note only auctions and syndication 10% 1.1 1.1 0.9 5% 1 0.2 0.2 0% Italy Belgium Estonia Cyprus Finland P NL EA-19 France Latvia EFSF rmany Germany Ireland Greece Lithuania Slovenia Austria Slovakia Ratio Floating Debt to Total Debt after derivatives LX ESM Malta EU (issuer) 34 34#35NTMA has lengthened weighted maturity Debt management strategy took advantage of QE to extend debt profile since 2015 Benchmark issuance has extended the maturity of Government debt... ...Ireland (in years) compares favourably to other EU countries 2812086420 14 11.4 12 10.8 10.5 10 8.7 8.6 8.3 7.7 7.6 7.5 7.0 6.8 642 0 2015 2016 2017 2018 2019 2020 2021 2022 I Weighted average maturity Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: NTMA AT BG IR DK NL FR ES FN BD IT PT Govt Debt Securities - Weighted Maturity -EA Govt Debt Securities - Avg. Weighted Maturity Note: Weighted maturity for Ireland includes Fixed rate benchmark bonds, FRNS, Amortising Bonds, Notes issued under EMTN programme, T-Bills and ECP Data. It excludes programme loans and retail. Source: ECB 35 35#36Funding needs and sources Lower borrowing results in cash balance running down 18 16 Other: 5.5 14 ▸ There are two bond redemptions in 2022, one of which occurred in March. They total €11.8bn. ▸ The Exchequer Borrowing Requirement (EBR) for 2021 was €7.4bn. This was lower than expected in October's Budget (forecasted EBR of €12.1bn). Thus, the NTMA entered 2022 with a large cash balance of €27.5bn. ▸ In 2022, the EBR for the year has been revised to be a surplus. This is shown in the chart. €bn 12 10 8 00 9 Other: 1.9 Reduction in cash position: 8.3 Bond Redemptions EBR 0.3 11.8 4 ▸ The NTMA is likely to continue to hold significant cash into 2023. The balance at year-end will be c. €20bn. 2 Bond issuance: 6.9 Rounding may affect totals 1. Funding Requirements Sources of Funding Source: NTMA On 28 September 2022, the NTMA announced there would be no bond issuance in Q4 2022 meaning total nominal issuance for the year is €7bn; the cash proceeds, including from the non-competitive auctions, are shown in the chart. Other funding needs includes provision for the potential bond/FRN purchases and general contingencies. Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 2. 3. Other funding sources mostly comprises of net State Savings (retail) and other medium/long-term borrowing. 4. EBR is the Department of Finance's Budget 2023 estimate of the Exchequer Borrowing Requirement 36#37Diverse holders of Irish debt Sticky sources account for c. 60% Ireland roughly split 85/15 on non-resident versus resident holdings (end-2021) "Sticky" sources - official loans, Eurosystem, retail - make up c. 60% of Irish debt 250 200 Other Debt (incl. Official) 22% 150 IGBS - Private Non Resident 100 32% 50 Retail, Resident 11% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 IGBS Private Non Resident Short term Eurosystem 29% Short term 2% IGBS - Private Resident 4% | Retail Source: CBI, Eurostat, ECB National Treasury Management Agency Total Debt (€bns) IGBS Private Resident Eurosystem Other Debt (incl. Official) Source: CBI, Eurostat, ECB Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta IGBS excludes those held by Eurosystem. Eurosystem holdings include SMP, PSPP, PEPP and CBI holdings of FRNs. Figures do not include ANFA. Other debt has included IMF, EFSF, EFSM, Bilateral as well as IBRC-related liabilities over time. Retail includes State Savings and other currency and deposits. The CSO series has been altered to exclude the impact of IBRC. 37 37#38Investor base Demand for Government bonds is wide and varied Country breakdown: Average over last five syndications 9.6% 14.0% 42.4% Investor breakdown: Average over last five syndications 10.0% 9.6% 32.0% 25.4% 6.4% ■Ireland UK US and Canada ■Continental Europe ■Nordics Asia & Other Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: NTMA 48.6% ■Fund/Asset Manager Banks/Central Banks* Pensions/Insurance ■ Other Source: NTMA * Does not include ECB. ECB does not participate on primary market under its various asset purchasing programmes 38 38#39Credit Ratings for Ireland Four upgrades in 2022 so far; Ireland rated in "AA" category by majority Rating Agency Long-term Short-term Outlook/ Trend Date of last change Date of next review Standard & Poor's AA- A-1+ Stable Nov 2019 Nov 2022 Fitch Ratings AA- F1+ Stable Jan 2022 Jul 2022 Moody's A1 P-1 Positive May 2022 Nov 2022 DBRS Morningstar AA(low) R-1 (middle) Stable Jan 2022 2023 R&I AA- a-1 Stable Feb 2022 2023 KBRA AA- K1+ Stable Jan. 2020 Dec 2022 Scope AA- S-1+ Stable May 2021 Oct 2022 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 39#40Commission's ruling on Apple annulled Further appeal by EC means case continues In 2016, the European Commission ruled that Ireland illegally provided State aid of up to €13bn, plus interest to Apple. This figure was based on the tax foregone as a result of a historic provision in Ireland's tax code. The Irish Government closed this provision on December 31st 2014. Apple appealed the ruling, as did the Irish Government. The General Court granted the appeal in July 2020, annulling the EC's ruling. This case had nothing to do with Ireland's corporate tax rate. It related to whether Ireland gave unfair advantage to Apple with its tax dealings. The General Court has judged no such advantage occurred. The Commission has decided to appeal to a higher court: the European Court of Justice. This process could still be lengthy. Pending the outcome of the second appeal, the €13bn plus EU interest will remain in an escrow fund. The NTMA has made no allowance for these funds in any of its planning throughout the whole process. There is no need to adjust funding plans given the decision by the General Court or by the Commission's decision to appeal. Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 40 40#41ESG Issuance & government policy demonstrate Ireland's green commitment Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 開 ☐ ☐ 41#4260 50 40 30 20 10 0 1990 80 70 1992 1994 1996 1998 Ireland's Greenhouse Gas emissions State of Play - emissions rose in 2021 after fall in Covid year Ireland's emissions fell post financial crisis - but significant progress needs to made by end of decade Emissions from agriculture make up a significant portion of the total In Ireland (c. 10% in EU and US) 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 GHG emissions ((Mt CO2eq))) Without legislated measures Climate Act Plan 2021 commitment 2022 2024 2026 2028 2030 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Environment Protection Agency (Ireland), Climate Action Plan 2021 Note: Metric used is million tonnes carbon dioxide equivalent (Mt CO2eq) F-gases, 1.2%. Agriculture, 37.5% Transport, 17.7% Industrial Processes, 4.0% Energy Industries, 16.7% Waste, 1.5% Residential, 11.4% Manuf. Combustion, 7.5% Commercial Services, 1.3% Public Services, 1.1% 42#43Ireland Energy: Fossil fuels prevalent Irelands energy mix is reliant on fossil fuels but renewables share to increase by 2030 Oil accounts for the largest share of Irelands energy mix. Transport accounted for 63% of oil use in 2021 Electricity production has become more renewables based but still far from Climate Action Plan aims of 80% by 2030 Peat, 1.7% Wastes Non- Coal, 2.4% Renewables, 4.3% Renewable, 0.5% Electricity, 21.9% Gas, 17.5% 60% 50% 40% 30% 20% 10% Oil, 51.7% 0% Natural Gas Renewables (total) Wind Peat Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: SEAI, Climate Action Plan 2021, EU Renewable Energy Directive Waste (non-renewables) accounted for 0% (2005) and <1% (2019) of electricity production Electricity imports (net) 2005 2019 Wind generation was the second largest source of electricity in 2020 Coal Oil 43#44Ireland's Energy Imports Ireland less reliant on Russian energy compared to many European countries Russia is an important supplier of solid fossil fuels (e.g. coal) but these account for just 2.4% of Ireland's energy mix Ireland's dependence on Russia for energy has been low in the past and remains well below other EU countries Fuel Type #1 Source #2 Source #3 Source 6% #4 Source 5% Oil and Petroleum United United Kingdom States (41%) (30%) Norway Russia 4% (7%) (5%) 3% Natural Gas United Kingdom (64%) Domestic* (36%) 2% n/a n/a 1% (25%) Solid Fossil South Africa Colombia Russia Fuels (22%) (21%) United Kingdom (19%) 0% Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Eurostat, SEAI *Corrib/Kinsale gas fields 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 % energy imported from Russia 44#45Climate Action Legislation The Climate Action & Low Carbon Development Act 2021 aims for Net Zero by 2050 Climate Action & Low Carbon Act: Carbon Budgeting: The Act embeds the process of carbon budgeting into law. It requires Government to adopt a series of economy-wide-five-year carbon budgets. 51% reduction: First carbon budgets will aim for a reduction of 51% of emissions by 2030. Climate Action Strategy: A national plan will be prepared every five years and actions for each sector will be update annually. All of Government approach: Local authorities are required to prepare a Climate Action Plan and public bodies obliged to conduct their functions in line with the national plan. Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency *F-gases, Petroleum Refining and Waste Climate Action Plan Goals: ▸ Target of 5GW of offshore and up to 8GW of onshore wind energy by 2030. ▸ Enable 500,000 sustainable travel journeys per day. Increase biofuel use in transport, bus and rail replacements to be low or zero carbon emissions. Increase proportion of kms driven by electric cars to 40-45%. ▸ Commitment to retrofit 500,000 homes by 2030 and install 680,000 renewable energy heat sources in new and existing residential buildings. Sector % Reduction by 2030 relative to GHG emissions 2030 Ceiling 2018 Electricity 75% 3 MtCO2eq Transport 50% 6 MtCO2eq Buildings (Commercial and Public) 45% 1 MtCO2eq Buildings (Residential) 40% 4 MtCO2eq Industry 25% 4 MtCO2eq Agriculture Other* 25% 17.25 MtCO2eq 45 50% 1 MtCO2eq#46Irish Sovereign Green Bonds (ISGB) Irish Sovereign Green Bond Impact Report 2020: sample impacts . • Some highlights from the report* Built Environment/ Energy Efficiency • Energy saving (GigaWattHours): 156 Number of homes renovated: 19,086 EV home charger grants provided: 2,523 Clean Transportation • Number of public transport passenger journeys: 137.7 million Greenway users: 725,191** Take-up of Grant Schemes/ Tax foregone provided (number of vehicles): 24,122 Climate Change Adaptation • • 16 major Flood relief projects at planning, development or construction phase. 8,296 properties protected on completion Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Allocation of ISGB funding has focused on Water/Waste management and transportation Built environment/ energy efficiency, 5.4% Clean Renewable energy total, 0.3% O transportation Climate change adaptation, 2.7% Sustainable water and wastewater management 30.6% Mgmt of natural resources, 6.8% 54.2% *For a more detailed break-down please see the forthcoming ISGB 2020 Impact Report **Raw count from 3 longest Greenways- Waterford, Old Rail Trail, Royal Canal Greenway 46#47Irish Sovereign Green Bonds (ISGB) Cumulative €7.34bn allocated to green projects following fourth year €6.85bn nominal outstanding (€7.34bn cash equivalent) There was full allocation of remaining proceeds from ISGBS on hand at year end 2021 Issuance through both syndicated sales and auctions Pipeline for eligible green expenditure remains strong Launched 2018 and based on ICMA Green Bond Principles - Use of proceeds model Governed by a Working Group of government departments chaired by the Department of Finance Compliance reviews by Sustainalytics Four annual allocation reports and three annual impact reports now published Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Irish Sovereign Green Bond Impact Report 2020: Highlights* ▸ Environmentally Sustainable Management of Living Natural Resources and Land Use Number of hectares of forest planted: 2,434 Number of Landfill Remediation projects being funded: 76 ▸ Renewable Energy Number of companies (including public sector organisations) benefitting from SEAI Research & Innovation programmes as lead, partner or active collaborators: 19 SEAI Research & Innovation awards: 11 ▸ Sustainable water and wastewater management Water savings (litres of water per day) : 227.6 million New & upgraded water and wastewater treatment plants: 5 Length of water main laid (total): 178km *For a more detailed break-down please see the forthcoming ISGB 2020 Impact Report 47#48Ireland in top 20 most sustainable countries Ireland rated highly by Sustainalytics and rating agencies on ESG 16 14 12 10 CANDR6420 Ireland ranks 15th globally by Sustainalytics for ESG risk Moody's view on Ireland much like other agencies - strong governance a key risk mitigant CIS-1 Positive "For an issuer CIS-1 (Positive), its ESG attributes are overall considered as having a positive impact on the rating. The overall influence...... is material". Norway Switzerland Luxembourg Sweden Australia Iceland Canada Denmark Finland Austria Ireland Netherlands Germany New Zealand United States United Kingdom Japan France Belgium Singapore Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Sustainalytics (2021), Moody's NEGATIVE IMPACT Ireland's ESG Credit Impact Score: "low exposure to environmental risk" "a positive influence of its social considerations" "very strong governance profile" Note: Sustainalytics score is out of 100, closer to zero means less ESG risk SECTOR MEDIAN " POSITIVE IMPACT 48 42#49Ireland similar to OECD but behind others when considering intensity metrics Close to OECD average on SDG progress But behind some of the leaders in Europe GHG OECD emissions Ranking (1st per unit of CO2 OECD % 100 OECD = High emissions Ranking (1st Renewable per unit of = High Ranking (1st 90 energy is desirable) 80 GDP Intensity) GDP Intensity) supply 70 Ireland 0.2 30 0.09 35 11.1 24 60 Ire (GNI*) 0.3 11 0.14 24 50 OECD 0.3 n/a 0.14 n/a 40 Australia 0.5 2 0.32 2 7.1 35 30 Belgium 0.2 19 0.17 14 7.8 32 20 Canada 0.5 4 0.34 1 16.4 18 10 France 0.2 33 0.10 34 10.7 26 0 Germany 0.2 23 0.16 17 14.6 21 Italy 0.2 28 0.13 27 18.2 16 NL 0.2 25 0.16 17 7.2 34 UK 0.2 32 0.12 30 12.5 23 Spain 0.2 27 0.13 27 14.7 20 US 0.4 6 0.24 6 7.9 31 National Treasury Management Agency Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta Source: OECD, EPA, Sustainable development report 2022 Finland Ireland ranked 9th globally on progress towards achieving the Sustainable Development Goals Denmark Sweden Norway Austria Germany France Ireland Estonia Switzerland UK Poland Latvia Czech Rep. Slovenia Spain SDG 2022 Index Score SDG Government Commitment & Effort Score NL Belgium Japan Portugal OECD average 49 49#501.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Poverty Food Health Education Gender equality Water Energy Economy Infrastructure Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: OECD (2021) Ireland o OECD Each bar shows "distance" country needs to travel to reach each SDG. Distances are measured in standardised units with O indicating that the level for 2030 has already been attained: and 3 is the distance most OECD countries have already travelled. Bars show the average country performance against all targets under the relevant Goal for which data are available, and diamonds show the OECD average. о Inequality Cities Sus. production 50 50 Climate Ireland compares well to OECD on "S&G" Based on the 17 Sustainability and Development Goals of the UN TH Oceans Biodiversity Institutions Implementation о О#510.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 Finland Denmark Austria Sweden Germany NL France Luxembourg Estonia Slovenia Ireland Belgium Lithuania Latvia Portugal Poland Czech Rep. Spain Italy Greece Ireland ranked middle of the pack for readiness* when Readiness and vulnerability to climate change Irelands vulnerability to climate change and readiness to strengthen resilience have improved compared to EU27 1995-2019 0.5 Ireland ranked 18th least Ireland ranked 25th globally in 0.4 vulnerable country 0.4 readiness 0.3 0.3 0.2 0.2 0.1 0.1 Cyprus Slovakia Malta Hungary Croatia Bulgaria Romania 0.0 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Notre Dame Global Adaptation Initiative *Readiness: Measures a country's ability to leverage investments and convert them to adaptation actions. ** Vulnerability: Measures a country's exposure, sensitivity and capacity to adapt to the negative effects of climate change. Ireland's overall vulnerability** has decreased 5.3% from Food Health Capacity Sensitivity Vulnerability Water Ecosystems 2019 1995 Infrastructure Habitat Exposure 5. 51#52Structure of the Irish Economy Multinationals distort the "true" economic picture but offer clear benefits of jobs, income, taxes Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 開 ☐ ☐ 52 62#53Multinational activity distorts Ireland's data Notwithstanding those issues, MNCs have real positive impact Multinationals dominate GVA: profits are booked here but overstate Irish wealth generation Professional services 10% Arts & Other 1% Public sector Domestic side of economy adds jobs; MNCs add GVA/high wages Share of Employment Share of Share of Wage Bill (2021) GVA (2022 Q1) (2021) Agriculture 4.1% 1% 1% 9% Real estate 6% Financial & insurance 5% Industry (incl. Pharma) Industry (incl. Pharma.) 12.5% 14% 40% Construction 6.4% 4% 2% 40% Dist., Tran, Hotel 23.2% 17% 8% & Rest ICT (Tech) 6.6% 10% 18% Dist, tran, hotel & rest 8% Construction 2% Agri, forest & fish 1% ICT (Tech) 18% Financial 4.9% 8% 5% Real Estate 0.5% 1% 6% Professional 10.7% 14% 10% Public Sector 26.7% 29% 9% Arts & Other 4.4% 2% 1% Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO 2021 Real GVA used 53 53#54EUR, billion €0.6trn of intellectual property into Ireland Assets brought here by tech. & pharma. in recent years Ireland is now a leader in Computer Services; Exports have up from €50bn to €173bn since 2015 Enormous inflows (c. €0.6trn) of IP assets into Ireland since 2015 on the back of BEPS 1.0 reforms 500 175 150 125 100 75 30 25 - 20 15 10 50 25 01 I I 0 2008 2010 2012 2014 2016 2018 2020 2022 Computer Services Exports, Ihs €billions, Constant prices 400 300 200 100 0 1995-2014 2015 2016-21 I 2015 once-off IP assets increase estimate -Ireland % of World total, rhs I Fixed Capital Investment - IP assets Source: CSO, WTO Source: CSO, NTMA analysis Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 5.4 54#55Underlying economy was robust pre-Covid MNCs add real substance to IE economy as wage bill filters out to domestic sectors Ireland's income = wages (all sectors) + domestic sectors profits + tax on MNC profits Ireland, on an underlying basis, growing faster than euro area average in recent years (2008 = 100) 300 250 200 Compensation 150 MNC Gross of Employees Operating 28% 100 Surplus 50 (Profits) 50% Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Domestic Gross Operating Surplus (Profits) 22% 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 MNC Sector Profits Compensation of Employee Real GVA EA19 Source: CSO, NTMA calculations (Nominal 2021 data used in left chart) Domestic Sector Profits Real GVA ex. MNC Profits Ireland's GVA data has been adjusted to strip out the distortionary effects of some of the multinational activity that occurs in Ireland. Specifically a profit proxy is estimated for the sectors in which MNCs dominate. 55 55#56HN 10 % of population 30 20 Ireland's population helps growth potential Age profile younger than the EU average Ireland's population at 5.12m in 2022: younger population 70 60 50 than EU Ireland's population will age in decades to come; to remain younger than most of its EA counterparts 0 10 20 20 30 40 50 60 70 80 90 Japan Finland Italy France Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Germany Sweden Denmark NL Belgium Spain UK Austria 01 Canada <18 years 18-64 65+ Ireland Euro Area US Ireland World ■2020 Old Age Dependency Ratio = 2050 Source: Eurostat Source: UNDESA 56 56#57thousand Migration improves Ireland's human capital Ireland's net migration has swung back and forth on economic performance Latest Census data show net migration positive since 2015 - recent slowdown due to Covid Migration inflow particularly strong in highly educated cohort - work in MNCs attractive 150 100 50 thousand 30 25 20 15 10 -50 -100 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022 -5 -10 -15 Emigration IImmigration Net Migration Source: CSO Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Migration figures based on year to April | T T Third Level Other Education All Persons 12009- 2015 average 2016-2022 average Source: CSO 57 557#58Ireland's Government The composition of the Dáil Éireann is evenly balanced between Government and Opposition Key information on the 33rd Dáil Éireann ▸ Leadership FF FG Greens SF Other/Ind Labour Soc-Dem S-PBP Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Houses of the Oireachtas ▸ Taoiseach: Micheál Martin (FF) ▸ Tánaiste: Leo Varadkar (FG) - (Martin and Varadkar swap roles in Dec 2022) ▸ Leader of the Opposition: Mary Lou McDonald (SF) ▸ Political groups ▸ Government (79 seats, temporary lack of majority) ▸ Fianna Fáil (36), Fine Gael (33), Green Party (10) ▸ Opposition (80 seats) ▸ Sinn Féin (36), Other/Independent (26), Labour Party (7), Social Democrats (6), S-PBP (5) ▸ Voting system: Proportional representation - Single transferable vote ▸ Last election: 8 February 2020 ▸ Next election: No later than 20 February 2025 59 58#59Brexit Free trade agreement has re-routed trade patterns Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 開 ☐ ☐ 59#60Free Trade Agreement in place Allows for tariff free trade but non-tariff barriers have increased Main points of FTA • • From January 1 2021, the UK became a "third country" outside the EU's single market and customs union. As such without a free trade agreement, trade would have been subject to tariffs and quotas. Under the deal, goods trade between the two blocs remain free of tariffs. . However, goods moving between the UK and the EU will be subject to customs and other controls, and extra paperwork is expected to cause disruptions. Due to these non-tariff barriers, Brexit will likely result in less trade. Under the deal, services trade between the two blocs will continue but again could be hampered. The Agreement provides for a significant level of openness for trade in services and investment. But providing services could be hampered. For example, UK service suppliers no longer have a "passporting" right, something crucial for financial services. They may need to establish themselves in the EU to continue operating. The deal means less cooperation in certain areas compared to before Brexit. Financial and business services are only included to a small extent. Cooperation on foreign policy, security and defence will be lower also. Brexit is likely to result in less trade in the long run between the EU and the UK but the deal does avoid the worst case scenarios: Hard Brexit was averted and the economic impact to Ireland will be more modest. Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 60 60#61Withdrawal Agreement signed in 2019 Northern Ireland protocol within Withdrawal Agreement resolves many but not all of the land border issues The withdrawal agreement is a legally binding international treaty which works in tandem with the free trade agreement. Northern Ireland will remain within the UK Customs Union but will abide by EU Customs Union rules - dual membership for NI. No hard border on the island of Ireland: the customs border is "in the Irish sea". Goods crossing from Republic of Ireland to Northern Ireland will not require checks, but goods that are continuing on to the UK mainland will. Complex arrangements will be necessary to differentiate between goods going to NI and those travelling through NI to UK or vice versa. Customs checks at ports, VAT and tariff rebates and alignment of regulations will be needed. All of the island of Ireland remains in the EU's "single market" for goods, with a customs border in the Irish Sea Northern Ireland remains part of the U.K.'s customs regime but collects taxes and tariffs on behalf of the EU NORTHERN IRELAND REPUBLIC OF IRELAND Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency SCOTLAND Irish Sea U.K. WALES ENGLAND 199 61#62Impact of Brexit on Ireland likely net negative Deal means the shock is smaller & spread over longer horizon Modelled impact on output (in % of growth) versus No Brexit baseline: FTA reduces impact significantly -1 -2 -4 IE trading partners: UK important for good imports (land bridge) & services exports % of total Goods Services (2020) (2020) Total (2020) Exp. Imp. Exp. Imp. Exp. Imp. US 31.2 15.5 13.5 35.0 20.6 30.7 UK 9.1 23.1 14.4 6.6 12.0 10.0 -5 567 -6 EU-27 39.6 34.9 30.6 11.7 34.2 16.8 -7 China 6.8 7.6 2.9 1.6 4.4 3.0 2020 2021 2022 2023 2024 2025 FTA WTO Disorderly No-Deal Other 13.3 18.9 38.6 45.1 28.5 39.3 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CBI, NTMA analysis 62 62#6330 25 20 15 10 5 Trading flows are changing after FTA ROI-NI trade jumped in 2021, both imports and exports NI trading route more important than ever for IE-UK trade - special trade status of NI a factor UK exit from single market will continue trend of lower goods trade between IE & UK отлично 0 T I 1974 1980 1986 1992 1998 2004 2010 2016 2022 ▪ Exports to NI (% of exports to UK) - Imports to NI (% of imports to UK) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO 60% 50% 40% 30% 20% 10% 0% 1977 1979 1981 1983 1985 1987 1989 1661 686T 1991 1993 1993 1995 1995 1997 Z66T 1999 1999 2001 2001 2003 2005 2005 2007 2009 2011 2011 2012 2013 2015 2017 2019 2021 % of Irish agri exports going to UK % of other Irish goods exports going to UK Source: CSO 83 63#64Modest benefit: FDI inflows into Ireland The UK (City of London) has lost degree of access to EU market FDI: Ireland benefitting already ▸ Ireland could be a beneficiary from displaced FDI. The chief areas of interest are Financial services Business services Companies that have indicated jobs have or will be moved to Ireland BARCLAYS Morgan Stanley citi • IT/ new media. TD LEGG MASON GLOBAL ASSET MANAGEMENT ▸ Dublin is primarily competing with Frankfurt, Paris, Luxembourg and Amsterdam for financial services. The UK (City of London) has lost significant degree of access to EU market so there may be more opportunities in time. ► 2019 figures from the IDA have shown that at least 70 investments into Ireland have been approved since the announcement of Brexit. J.P.Morgan Goldman Sachs Bank of America Merrill Lynch Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency S&P Global Ratings BARINGS 64#65Property & Banks Significant price pressures resulting from a lack of supply and strong demand Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency ☐ ☐ 65 55#66Prices have risen since Covid Pandemic hampered supply as demand relatively unchanged (c.33k units needed p.a.) House prices close to previous peak in 2007 (=100), prices up 13% year-on-year 110 70 100 60 90 80 70 60 Number, thousand 50 40 Transactions have rebounded after Covid lockdowns 50 40 30 20 20 10 30 20 50 -10 10 40 -20 0 | I 1 2006 2008 2010 2012 2014 2016 2018 2020 2022 2012 2014 2016 2018 2020 2022 - National Dublin Excluding Dublin 14Q Sum of Transactions, Ihs -Y-o-Y Change, rhs Source: CSO Source: CSO Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 66 99#67Completions forecasted to grow 50% by 2024 2022-24 may see rebound in supply - housing starts 30k+ in last 12 months 35 30 25 20 Number, thousand 10 5 0 New Dwellings Completions* hampered by Covid lockdowns in 2020 and 2021, rebound expected in 2022, 2023** Recent housing starts show supply is responding - last 12 months have seen 25K units completed 40 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 New Dwelling Completion -All Connections Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta * National Treasury Management Agency Source: CSO Thousands 35 30 25 20 15 10 0 5 2017 2018 2019 2020 2021 2022 2023 Starts (advanced 12 months) Completions (new dwellings) Source: CSO, DOH Housing completions derived from electrical grid connection data for a property. Reconnections of old houses or connections from "ghost estates" overstate the annual run rate of new building (all connections in graph). ** 2022 & 2023 CBI Forecast 20 67#68Inflation clear in construction sector Increased material costs obvious but wages haven't expanded rapidly yet Materials up 20.6% year-on-year in July - may start to slow new development Latest earnings data in construction show wage inflation jumped above the rest of the economy but series is volatile 25 20 8 6 4 15 2 di 10 do 0 -2 ம -4 -6 I 2016 2017 2018 2019 2020 2021 2022 -8 I I I | | 2010 2012 - Industrial Price Index (materials and wages, y-o-y %) All building materials (y-o-y %) 2014 2016 2018 2020 2022 - All NACE Economic Sectors Construction Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO RHS = weekly earnings on a 4Q yearly growth rate Source: CSO 68 89#69Latent demand is strong Mortgage drawdowns increasing Mortgage drawdowns* (000s) rose in recent quarters after Covid-19 impact Thousands 120 80 60 20 ཁྐྲ ཎྜ 8 ཋ ¥ ཤྐ ॰ 100 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 Residential Investment Letting ■Mover purchaser First Time Buyers Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: BPFI; CSO *4 quarter sum used (LHS) Non-mortgage transactions still important - c.40% of all Thousands 25 20 15 250 10 transactions 80% 60% 40% 20% 0% Non-mortgage transactions Mortgage drawdowns for house purchase Non-mortgage transactions % of total (RHS) 69 49#70Covid-19 impact on prices coming through Inflation driven by strong demand with rents pressure strong House prices up 13% in the year to July 2022 with monthly growth still robust Rents pressures strong with a y-on-y increase of 12.7% after initial Covid related softening 30 20 10 do 0 -10 -20 -30 I I I I I I 200 3 175 2 150 125 do 0 100 -1 75 50 25 2008 2010 2012 2014 2016 2018 2020 2022 0 T I T T T 2006 2008 2010 2012 2014 2016 2018 2020 2022 National (M-o-M %), rhs National (Y-o-Y%), Ihs National excl Dub (Y-o-Y %), Ihs - Dublin (Y-o-Y %), Ihs Rents (100-2005) - Price Source: CSO Source: CSO Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 70 10#7160 50 40 30 20 10 0 -10 -20 -30 -40 Price valuation metrics somewhat unclear But the market is not comparable to mid 2000s ECB estimates* indicate that residential prices in Ireland are currently undervalued... ...but by OECD measures they are above long run average price to rent metrics 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 National Treasury Management Agency 2015Q1 80% Above zero represents overvaluation 60% 2016Q1 2017Q1 2018Q1 2019Q1 2020Q1 Maximum Average Minimum Source: ECB, OECD Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta 2021Q1 40% 20% 0% *Estimates based on methods relating to housing demand forces and asset pricing framework **Note: Measured as % over or under valuation relative to long term averages since 1980. Deviation from average price-to-rent ratio (Q4 2021, red dot represent Q1 2008) ** -20% LX BG UK DN NL FR OE ES IE BD EA FN PT GR IT 71#72Ireland's Banking Sector Overview Less competition possible in decade to come • Banks profitable before Covid-19: income, cost and balance sheet metrics much improved. Net interest margins will be helped by rising interest rate environment. Ulster Bank and KBC - both of which have no govt. ownership have decided to leave Irish banking market. Reduced competition is main impact. The Irish Government has sold its share in BOI. This leaves just AIB and PTSB with government involvement. A tranche of AIB shares were sold in June 2022 which returned another €304.8mn to the Irish Exchequer. The Government still own approx. 63.5% of AIB. 4.0% 2.0% Net Interest Margin -1 21012 0.0% -2 AIB BOI PTSB AIB 2018 2019 2020 2021 | 2022 H1 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Annual reports of banks - BOI, AIB, PTSB Profit before Tax BOI 2018 2019 2020 ■2021 E 2022 H1 PTSB 12 72#73Capital ratios strengthened in last 10 years Bank's balance sheets contracted and consolidated since GFC CET 1 capital ratios allow for ample forbearance in 2022 17% 16% 15% 16.6% 16.0% 16.1% 14% 15.3% 15.5% 14.7% Loan-to-deposit ratios have fallen significantly as loan books 200 150 100 50 were slashed Loan-to- Deposit % Loans (€bn) Loan-to- Deposit % Loans (€bn) 13% CET1% (Transitional) CET1 % (Fully Loaded) AIB BOI AIB BOI PTSB Dec-10 Jun-22 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Published bank accounts Note: "Fully loaded" CET1 ratios used. Refers to the actual Basel III basis for CET1 ratios. 73#74Disclaimer The information in this presentation is issued by the National Treasury Management Agency (NTMA) for informational purposes. The contents of the presentation do not constitute investment advice and should not be read as such. The presentation does not constitute and is not an invitation or offer to buy or sell securities. The NTMA makes no warranty, express or implied, nor assumes any liability or responsibility for the accuracy, correctness, completeness, availability, fitness for purpose or use of any information that is available in this presentation nor represents that its use would not infringe other proprietary rights. The information contained in this presentation speaks only as of the particular date or dates included in the accompanying slides. The NTMA undertakes no obligation to, and disclaims any duty to, update any of the information provided. Nothing contained in this presentation is, or may be relied on as a promise or representation (past or future) of the Irish State or the NTMA. The contents of this presentation should not be construed as legal, business or tax advice. Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 74