#1Ireland: Lockdown restrictions easing in Q2 Vaccines, household savings and external environment give optimism for recovery from H2 onwards May 2021 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency#2Index Page 3: Summary Page 8: Macro Page 22: Fiscal Page 32: NTMA Funding Page 46: Structure of Irish Economy Page 55: Brexit Page 61: Property Page 68: Banks and Other Data Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 2#3Summary Irish economy has shown remarkable resilience amid Covid shock Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency#4-15% -20% 2005 2007 2010 Domestic Demand 2012 2020 Economic performance showed resilience; re-opening in Q2 before vaccine rollout underpins H2 recovery GDP remained positive in 2020 but domestic sectors hit Unemployment to unwind as economy begins to open Value added from ICT & pharma has given Ireland resilience 35% 200.0 700 30% 180.0 25% 600 160.0 20% 140.0 500 15% 120.0 10% 400 100.0 80.0 5% 300 60.0 0% 200 40.0 -5% 20.0 -10% 100 2015 2017 2020 GDP 0 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Unemployment claimants (Index, Jan 20 = 100) Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO * Domestic demand series accounts for multinational activity and known as modified final domestic demand (excludes inventories) ** Whether those on government income supports are unemployed is statistically debatable. Some will have left the labour force, others are just temporarily furloughed. 0.0 1996 1998 2000 2002 2004 2006 2008 2010 2012 GVA: Multinational dominated sectors (€bns) GVA: Domestic sectors 4 2014 2016 2018#5Ireland's debt figures to reverse in 2020 and 2021 as large fiscal response needed; Govt. to set path back to balance Run of primary surpluses before '20 GG deficit c. €19bn 10 Debt position reversed in 2020 Debt fell from 166% to 95% of national income pre-Covid 180% 5 0 M 160% Debt-to-GNI* (106% 2020f; 95% in 2019) 140% TTT TT 120% -5 Debt-to-GG Revenue 100% (254% 2020; 229% in 2019) 80% -10 60% Average interest rate -15 40% (1.8% 2020, from 2.2% in 2019) 20% -20 Debt-to-GDP 0% -25 (60% 2020, from 57% in 2019) 1995 2000 2005 2010 2015 2020 1995 2000 2005 2010 2015 2020 GG Balance Primary Balance Debt to GNI* Debt to GDP Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO, Department of Finance ^ due to GDP distortions, Debt to GDP is not representative for Ireland, we suggest using other measures listed. 5#6Medium term economic challenges - Covid recovery, deficit reduction and possible OECD tax reform Recovery Ireland under strict lockdown in early 2021. But restrictions are easing and vaccine rollout underway Current lockdown will impact H1 growth before recovery can begin in H2 Policy Significant stimulus announced equivalent to 19% of GNI* over 2020 and 2021 Deficits are necessary but in time public support to economy to be reduced Tax Proposed corporate tax reform led by the OECD may impact Ireland's growth model Global minimum tax rate hits at Ireland's FDI proposition to multinationals, possibly reducing future growth Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 6#7NTMA has indicated a funding plan of €16 - €20bn for 2021 €12bn already funded this year Flexibility >10 years Ireland has large cash balances and a year free of maturing bonds in 2021 In addition to bond funding, Ireland received €2.5bn in EU Sure funding in Q1 Weighted average maturity of debt one of longest in Europe The ECB's first QE program enabled NTMA to extend debt maturities and reduce interest cost. Now ECB buying in large amounts with few limitations AA- Ireland has been affirmed in AA category by S&P On relative basis, hit to Ireland less than for other countries given multinationals, relatively smaller domestic share of economy and tourism Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 7#8Section 1: Macro Domestic economy hit hard by restrictions but resilience shown in income, tax and exports data Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency#91,400 1,200 1,000 800 600 400 200 Mar-20 Cautious re-opening underway in Q2, schools/construction were back in April, retail in May, hospitality set for June 14 day cumulative Covid-19 cases/deaths per 100k of population Ireland case numbers versus other countries (per 100k of population) 25 1,600 2021 lockdown 1,400 20 20 1,200 1,000 15 800 600 10 400 200 5 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Cases Deaths (RHS) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Mar-21 May-21 Source: DataStream Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Ireland France Germany Italy Spain US UK 9#10Vaccine rollout accelerating - c. 35% with one dose in mid-May Rollout has shifted gears in recent weeks Ireland unlikely to have issues regarding vaccine hesitancy 90% 100 90 80% Government target of 80% with one dose 80 70% by end Q2 70 60% 60 50 50% 40 40% 30 30% 20 10 20% 0 10% 0% 01/21 02/21 03/21 04/21 05/21 06/21 % of adult population with one dose Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: DataStream, Eurofound Survey Ireland Denmark Portugal Sweden Spain Finland Italy EU 27 Belgium Netherlands Greece Germany Cyprus Romania Estonia Czechia Austria Slovakia Hungary Poland Lithuania Slovenia France Croatia Latvia Bulgaria % intending to take vaccine 10#11Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Millions 1.2 The effects of 2021 lockdown are evident but not as severe as the initial Covid lockdown Those on government supports Spending fell in Q1 but well below levels seen in Q2 2020 recovering (base effect Apr.) PMIs have recovered quicker this time around 50% 2021 lockdown 40% 60 1 30% 50 0.8 20% 40 10% 0.6 30 0% 0.4 2020 Q2 20 -10% lockdown -20% 10 0.2 -30% 0 Apr-21 -40% Number of people on income support schemes I Spending on debit and credit cards (y-o-y change) Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO, Department of Social Protection, Revenue, CBI, Markit Feb-21 Mar-21 Apr-21 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 -Services Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Manufacturing -Composite 11 70#12On a relative basis Ireland performed well in 2020 - thanks ICT (tech) and pharmaceutical firms to 4% 2% 0% -2% -4% -6% -8% -10% -12% Real GDP up 2.5% Y-o-Y in 2020 for Ireland: GDP overstates impact of multinationals Real MFDD down 5.4% Y-o-Y in 2020: MFDD understates impact of multinationals Ireland S Korea Norway Australia Sweden New Zealand Switzerland Finland ՏՈ NL Denmark Japan Canada Germany Belgium Austria EA ■Y-o-Y impact to GDP (Q1-Q4, 2020 constant prices) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Italy France Portugal 0% -2% -4% -6% -8% -10% -12% S Korea Denmark Sweden ՏՈ Finland Switzerland Japan Germany NL Portugal Ireland EA-19 Belgium France Italy Austria UK Y-o-Y MFDD impact (Q1-Q4 2020, constant prices) Source: CSO, DataStream (seasonally adjusted data - 3.4% for non seasonally adjusted data) Note: MFDD for Ireland is modified for multinational activity by Ireland's Central Statistics Office (CSO). For other countries MFDD = Domestic demand = Consumption + Government (current) spending + Investment 12#13Sector breakdown for 2020 - Multinationals racing ahead, domestic side hit hard 20% 15.2% 13.1% 10% Domestic sectors hit badly - 26% of economy in these four categories 0% -0.5% -1.1% -1.6% -1.7% -10% Two sectors least -20% impacted are dominated by FDI -12.6% -15.4% -16.9% -30% -40% -50% -60% -54.4% Industry (incl. Pharma) ICT Fin & insurance Public, Educ & Health Agri, Fish Real Estate Construction Prof, Admin Dist, Trans, Arts & other & Support Hotels & Rest Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency I GVA Growth (2020, constant prices) Source: CSO 13#14Labour market data shows stark Covid-19 impact; 2021 has seen a reversal in unemployment rate 35 True unemployment rate is uncertain: Covid-19 adjusted rate 24.2%* in March 10% fall in actual hours worked per week in 2020; MDD fall smaller due to productivity mix 2.5 30 50 25 20 20 15 10 5 0 . 14.7 00 Millions 2 • • 1.5 1 • 5.2 • 0.5 Those "Away from Work" increased on average by 175k in 2020 - impacted heavily by Covid 0 2018 2019 2020 2005 2006 2007 2008 2009 2010 2011 2012 2013 Unemployment 2014 2015 2016 2017 2018 2019 ...Covid-19 Adjusted Unemployment Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO 2020 2021 I Away from work' (employed but not working) Unemployment Employment (those at work) * The CSO have estimated this as the upper bound of the unemployment rate. The CSO have urged caution around labour market data given the likelihood of revisions and the unique nature of employment status for some people in the pandemic. 14#15Approx. 700k on income support as lockdown continues to ease; schemes maintain aggregate household income Millions Those on the PUP and EWSS falling gradually since worst of lockdown in Q1 1.2 1 Supports mean disposable income grew in 2020 similar more to US than EU 0.8 0.6 0.4 0.2 0 10% 8% 6% 4% 2% 0% -2% -4% March April May June July August October September November December January February March Temporary Wage Subsidy Scheme/Employment Wage Subsidy Scheme Pandemic Unemployment Payment April Canada ՏՈ Australia Ireland Netherlands Belgium Portugal Germany Denmark UK France EU-27 EA-19 Greece Italy Austria Spain I Gross Disposable Household Income (y-o-y change 2020) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Revenue, DEASP, CSO, Revenue 15#16Consumption fell sharply in 2020 - down 9% versus 2019 despite incomes being maintained 30 Consumption sharply hit in Q2: Q4 saw a step back from Q3 level - down 9% y-o-y Retail sales numbers volatile on switch in and out of lockdown 2020Q2 lockdown 2021 lockdown 25 20 20 15 10 5 0 1998 2000 2002 2004 2006 2008 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Consumption Growth (Y-o-Y, RHS) Consumption (€bns, LHS) 2010 2012 2014 2016 2018 2020 Source: CSO 20% 40% 15% 20% 10% 0% 5% -20% 0% -40% -5% -10% -60% -15% -80% -20% -100% -25% 2019M01 2019M03 2019M05 2019M07 2019M09 2019M11 2020M01 2020M03 2020M05 2020M07 2020M09 2020M11 2021M01 2021M03 All Retail Bars Food Retail Department Stores 16#17Household balance sheets: debt levels much lower coming into pandemic + new Covid savings Gross HH saving rates jumped 2020 on back of forced savings - IE larger than most 25 Legacy of 2008-12 financial crisis is on the Government balance sheet 400% 20 20 15 % of Disposable Income (4Q MA) اعد و S 0 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Ireland EA-19 UK 350% 300% 250% 200% 150% 100% 50% 0% Public and Private Private debt (% of Public debt (% of debt (% of GNI*) GNI*) GNI*) 2003 2008 2013 2020e Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Eurostat, ONS, CSO; CBI, Note: Gross Savings as calculated by the CSO has tended to be a volatile series in the past, some caution is warranted when interpreting this data Note: Private debt includes household and Irish-resident enterprises (ex. financial intermediation) CBI quarterly financial accounts data used for household and CSO data for nominal government liabilities. 17#18Investment hit as construction sector has moved in & out of lockdown; closed in Q1 but starting to open in Q2 Employment in construction remained down in Q4 2020 but investment has rebounded Another surge of IP into Ireland in 2019-2020 - helps ICT but distorts investment picture 300 250 200 150 100 50 0 2006 2008 2010 2012 2014 2016 2018 2020 Construction Employment (000s) Building GFCF (€bn RHS) 10 200 9 180 160 8 140 7 120 6 100 5 80 4 60 3 40 2 20 1 0 0 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO; NTMA calculations € 966T 1998 2000 2002 2004 2006 2008 Building Investment I Distortions (mainly IP) Total GFCF Four-quarter sum (€bns) 2010 2012 2014 2016 2018 2020 Other Domestic Investment Modified GFCF 18#19External environment supportive - 2021 should see the global economy rebound given large stimulus & vaccines 2020 2021 Exports driven by demand for multinationals products - Pharma. and Tech EA Monetary Policy Maximum accommodative Maximum accommodative 50% 40% EU Fiscal Policy Expansionary Expansionary 30% US Monetary Policy Maximum accommodative Maximum accommodative 20% US growth Covid-19 shock Rebound 10% 0% TT TTTT TITTITI Significantly down Oil price Rising despite rebound -10% Covid-19 shock; Brexit resolved; -20% UK growth Brexit unresolved Rebound 2000 Euro Growth Covid-19 shock Rebound Euro currency Strengthening vs. Dollar Unclear 2003 2006 2009 2012 2015 2018 Exports Chemical Products and Computer Services Exports ex. Chem & Comp Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: NTMA analysis, DataStream, CSO 19#20Philips curve relationship has held in the past in Ireland but we are some way off full employment Inflation subdued in Ireland for close to a decade despite strong growth Full employment has led to inflation in past but a long way from there currently 7.0 6.0 5.0 4.0 3.0 2.0 1.0 -1.0 -2.0 -3.0 -4.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 OTOZ 2011 TTOZ 2012 2013 2014 STOZ FLOC ZIOZ HICP Ireland Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 2015 Average nom. MDD growth in 2014-19: 6% 2016 2017 2018 2019 2020 2021 HICP Euro Area Nominal COE growth per head* 12.0% 10.0% 8.0% 6.0% R2 = 0.8 2020 4.0% outlier 2.0% 0.0% -2.0% -4.0% 2.0% 5.0% 8.0% 11.0% 14.0% 17.0% 20.0% Unemployment Rate Source: CSO, NTMA analysis; *Non-Agriculture employment/wage data on yearly basis (1999-2020) 20 20#21OECD's BEPS 2.0 process could impact the business tax landscape globally - agreement may come in mid-2021 Pillar One: proposal to re-allocate taxing rights on non-routine profits The OECD has proposed further corporate tax reform a BEPS 2.0. BEPS 2.0 looks at two pillars. The first pillar focuses on proposals that would re-allocate taxing rights between jurisdictions where assets are held 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 would probably reduce Ireland's corporation tax base. Some estimates place the hit at 5-15% per annum. Nothing has been decided yet. There are disagreements across countries. Recent moves by US have given fresh impetus. Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency • Pillar Two: proposal for minimum effective global tax rate Pillar Two - the basic idea is to 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 would a 'top-up' to achieve the minimum rate of tax. It is possible this could be done. country-by-country. The obvious questions arise: what is the appropriate minimum tax rate? who will get the 'top-up' payment? These questions are as yet unanswered. If the minimum rate agreed is greater than the 12.5% rate that Ireland levies, it might erode Ireland's comparative advantage in attracting FDI. Ireland could need to lean on other positives; talented workforce, English speaking, EU access, ease of doing business 21#22Section 2: Fiscal Revenues have held up well with deficit expansion mainly spending related Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency#23Fiscal policy response to Covid has been swift Large deficit expected in 2021 similar to 2020 Response Revenues Total fiscal response of €38bn over 2020 and 2021 (19% of GNI*) is large Ireland has responded to Covid with first attempt at counter- cyclical fiscal policy in its 100 year history Ireland's economic structure has meant revenues have held up despite Covid-19 Strength of both Corporate and Income tax revenues from multinational sectors has helped sustain government coffers Debt Debt ratios have reversed due to Covid Gross Government debt 57% of GDP at end-2019 but close to 95% of GNI*. Ratios were c.60% and 106% for end-2020 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 23#2450 40 35 S5224 30 20 15 10 15 0 Norway Sweden Finland Ireland NL Korea Canada Australia IE (GNI*) Switzerland Denmark Belgium Singapore Direct Supports Indirect Supports Spain ZN UK USA France Germany Italy Japan Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: IMF, European Commission, Department of Finance Direct supports = Additional spending and forgone revenue Indirect supports = Equity, loans, and guarantees -18 Ireland fiscal response (c. €38bn, 19% of GNI*) highly skewed to direct supports unlike others in EU Combined 2020/21 Covid-19 fiscal response (% of GDP/GNI*) 2020 General Government Balance - Ireland close to Euro Area average (% of GDP) -4 -6 -8 -10 -12 -14 -16 Sweden Denmark Switzerland LX Germany Cyprus Ireland Greece NL Portugal Finland EA-19 Slovenia Italy Slovakia Austria France Spain Ireland (GNI*) Belgium 24 UK Japan ՏՈ -2 0#25The fiscal response to Covid is opposite of the GFC - interest bill won't balloon and investment set to increase After global financial crisis, Ireland cut capital spending, paid more interest as taxes fell... €bns 25 25 20 20 ...now revenues are more resilient, spending (incl. inv.) increases, interest bill unchanged €bns 25 25 20 15 45 15 10 10 GG Capital expenditure 10 5 GG Interest 5 Costs 0 GG Expenditure (underlying) 0 -5 -5 GG Revenue -10 -10 -15 -20 2007 2008 2009 2010 2011 2012 2013 -15 -20 2019 2020 2021f 2022f 2023f 2024f 2025f Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO, Department of Finance forecasts 25 Charts represent the change in billions for selected fiscal variables versus 2007/2019 levels. Underlying GG expenditure numbers used (excludes banking recapitalisations)#26-15% -20% 1995 -10% 1997 1999 -5% 2001 0% 2003 5% 2005 2007 GG Balance (% GNI*) 10% After Covid-19 stimulus, Ireland plans to narrow its deficit again Gen. Govt. Balance (% of GNI*) will be in significant deficit in 2020/21^ Revenues holding up despite pandemic; Deficit mostly due to expenditure increase 2009 2011 2013 25% 20% 15% 10% 5% 0% -5% -10% 2020 GGB % of GDP -5% -15% GGB % of GNI* -9% -20% 2015 2017 2019 2021f 2023f 2025f Primary Balance (% GNI*) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO; Department of Finance ^ Underlying GG and primary balance numbers used (excludes banking recapitalisations) 2020 vs 2019 Income tax VAT Excise duties I Corporation tax GG Revenue IGG Expenditure 26#27Gross Government debt c. 60% of GDP at end-2020 but close to 106% of GNI* 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 1995 1999 2003 2007 2011 2015 2019 2023f Debt to GNI* Debt to GDP Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO; Department of Finance, NTMA analysis 27 27#28Low interest rates coupled with reversion to growth may see helpful "i-g" snowball effect on debt ratios With low rates locked in, Ireland's "hurdle rate" for a positive snowball effect is low 20% 15% 10% Histogram of Ireland's recent growth history 9 8 (2001-2020) Nominal GNI* grew by more than 4% in 14 of last 20 years 5% 0% -5% TTT -10% -15% -20% 1998 2000 2002 2004 2006 2008 2010 2012 i-g Growth (GNI*) 2014 2016 2018 2020 2022f Average Interest Rate 2024f 0 16 5 + Number of years 2 1 3 Average interest rate likely between 1-2% for next few years <-8% -6-4% -4-2% Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO; Department of Finance forecasts, NTMA analysis GNI* -2% 0-2% 2-4% 4-6% %8-9 Annual Growth rate GDP GG Revenue 8-10% 10-12% 12%+ 28 20#29CT revenue cushioned by defensive nature of Pharma and ICT; income tax protected by nature of shock Corporation tax (CT) receipts continue to rise - have nearly tripled in 6 years Progressiveness of income tax system and sector mix limits hit to overall receipts 24% 14.0 40% 12.0 35% 20% 10.0 30% 16% 8.0 25% 12% 6.0 20% 8% 15% 4.0 4% In 2019, 40% of CT paid 10% 2.0 by 10 companies 5% 0% 1995 1997 1999 2001 2003 2005 2007 2009 2011 0% Corporation Tax (€bns, RHS) Corporation Tax (% of tax revenue) Corporation Tax (% of GG Revenue) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Under 10K 10K-30K Source: Department of Finance, Revenue, NTMA analysis 30K-50k 50K-100K 100k-150k 150K+ % of taxable income cases % of income tax collected 29#30NTMA's job is to finance the cash deficit (EBR) but it's best to use accruals-based GGB for comparison to peers EBR and GGB (€bns) usually minor - gap is Methodological Differences EBR GGB 10 10 -10 -20 -30 larger currently -60 2000 2002 -40 -50 banks hit GGB in 2010 but not EBR (non-cash expenditure) 2004 2006 2008 2010 Prom. Note capital transfer to recap 2012 2014 2016 2018 GG Balance EBR Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO, 2020f 2022f Department of Finance, NTMA analysis Accounting basis Cash (exchequer) Accrual Financial transactions Included Excluded Subset of Central Scope Govt. Includes all of Central & Local Intra-Government No Yes Consolidation 2020 2021 Comments EBR -12.3 -16.9 This is the deficit in cash terms that the NTMA must finance each year Adjust for Accruals 1.6 1.9 Accruals can relate to interest, taxes, other expenditures Transactions between the Exchequer and Exclude Equity & Loan Transactions -2.4 -0.3 NAMA, CBI and other govt. entities: this benefits funding req. Social Insurance Fund -3.5 -0.6 Semi State, ISIF, -1.5 -0.9 other funds Archaic funding structure of social insurance in Ireland is outside Exchequer. Consolidated in GGB Dividends and profits from government entities Local Govt. -0.4 -1.3 Local governments fund themselves Most complete metric for fiscal position. GGB -18.4 -18.1 Use this for deficit comparison with other nations 30#31Need to assess other metrics apart from debt to GDP when analysing debt sustainability 2020F GG debt to GG revenue % GG interest to GG rev % GG debt to GDP % Greece 411.7% 6.1% 207.1% Italy 332.7% 7.5% 159.6% Portugal 316.1% 6.9% 135.1% Spain 292.8% 5.8% 120.3% Cyprus 272.7% 5.7% 112.6% Ireland 254.4% 4.3% 59.5% Belgium 234.5% 4.1% 117.7% France 220.1% 2.6% 115.9% EA19 218.8% 3.4% 101.7% Slovenia 182.2% 3.8% 82.2% EU28 177.2% 3.5% 79.4% Austria 175.8% 2.9% 84.2% Germany 154.1% 1.5% 71.2% Slovakia 149.2% 3.0% 63.4% Netherlands 142.2% 1.4% 60.0% Finland 134.3% 1.4% 69.8% Source: EU Commission forecasts, Irish numbers are actual outturn Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta Ireland 105.6% Debt to GNI* ratio in 2020 (SPU 2021 Forecast) National Treasury Management Agency 31#32Section 3: NTMA Funding Flexibility in funding strategy due to smooth maturity profile and no 2021 bond redemptions Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency#33NTMA has indicated a funding plan of €16 - €20bn for 2021 €12bn already funded this year Flexibility >10 years Ireland has large cash balances and a year free of maturing bonds in 2021 In addition to bond funding, Ireland received €2.5bn in EU Sure funding in Q1 Weighted average maturity of debt one of longest in Europe The ECB's first QE program enabled NTMA to extend debt maturities and reduce interest cost. Now ECB buying in large amounts with few limitations AA- Ireland has been affirmed in AA category by S&P On relative basis, hit to Ireland less than for other countries given multinationals, relatively smaller domestic share of economy and tourism Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 33 33#34Flexibility helped by smoother maturity profile and no bond redemptions in 2021 Billions € 20 20 18 16 14 12 10 86 2 0 2021 2022 2023 2024 2025 2026 2027 2028 Bond (Fixed) EFSM EFSF I Bond (Floating Rate) Source: NTMA 2029 2030 2031 2032 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 2033 2034 2035 2036-40 Green Other (incl. SURE) 2041-45 2046-50 2051-53 2054+ 34 =2#35Near-term redemptions much lower than last four years; lower borrowing costs also provides NTMA with flexibility NTMA issued €104.5bn MLT debt since 2015; 13.4 yr. weighted maturity; avg. rate 0.75% Even with extra Covid-19 borrowings, NTMA might not match supply in 2017-2020 period 7.0 6.0 27 22 24 24 € Billions 80 88 10 70 5.5 5.0 3.9 4.0 221 21 18 60 60 15 50 7Y 10Y 3.0 12 15Y 40 40 9 10Y | 2.0 1.5 20Y 60 30 0.8 0.9 1.1 0.9 1.0 5Y 5Y 10Y 7Y 5Y 0.2 3 8Y 10Y 16Y BOY 10Y 20Y 0.1 20 0.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Auction Syndication Weighted Average Yield % (LHS) YTD 10 Issuance (2017-20) Redemptions + est. EBR (2021-25) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: NTMA, Department of Finance LHS chart showing marketable MLT debt (auctions and syndications). Other issuance such as inflation linked bonds, private placement and amortising bonds occurred but not shown. 35 55#36The NTMA has taken advantage of QE to extend debt profile since 2015 20 20 Various operations have extended the maturity of Government debt ... 12 ...Ireland (in years) now compares favourably to other EU countries 18 16 14 12 10 80 6 4 2 0 2015 2016 2017 2018 2019 2020 2021 YTD Weighted Average Maturity Issued (Years) 10 10 8 6 11.2 10.8 10.6 ▬▬ 4 8.0 7.8 7.8 7.5 7.1 7.0 6.9 6.7 2 0 IR BG AT ES FR DK NL FN IT BD PT HT I Govt Debt Securities - Weighted Maturity EA Govt Debt Securities - Avg. Weighted Maturity Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: NTMA for Ireland data; ECB for other countries 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. 36#37Various sources of funding will be used to meet Covid-19 borrowing requirements: cash balance and flexibility key €24 . No bonds mature in 2021. The last of the UK bilateral loan matured in Q1 2021. Other: 1.5 €20 Other: 4.6 Sure: 2.5 • The Exchequer Borrowing Requirement (EBR) for 2020 was lower than expected at €12.3bn. UK Bilateral: 0.5 €16 Thus, NTMA entered 2021 with a larger cash balance of €17.4bn. €12 NTMA has received monies from the EU SURE scheme. It is a diversified source of funding in 2021 (c. €2.5bn). EBR: 16.9 €8 Bond issuance: 18.3 €4 End year cash balances are currently forecasted at levels close to end-2020. €- Source: NTMA Funding Requirements (€bn) Sources of Funding (€bn) Notes: Rounding may affect totals as some figures have been rounded up to the nearest €bn. 1. The NTMA bond funding range for 2021 is €16-€20bn. While €18bn is reflected as an indicative estimate in the chart, it also includes cash proceeds from issuance undertaken to end-April. 2. Other funding needs includes provision for the potential bond/FRN purchases and general contingencies. Other funding sources includes retail (State Savings), private placements and EIB loan drawdowns. SURE refers to the European instrument for temporary Support to mitigate Unemployment Risks in an Emergency. EBR is the Department of Finance (April SPU) 2021 estimate of the Exchequer Borrowing Requirement 3. 4. Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 5. 37#380 1 2 9 In addition to PSPP, ECB's PEPP with its flexibility (no limits) & size (€1.85trn) will underpin Irish bond market € Billions 3 4 5 PEPP monthly IGB purchases running at roughly €1.2bn a month before ECB decision to speed up purchases Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 PSPP Net IGB purchases (LHS) Cumulative Net ECB Purchases (RHS) PEPP/PSPP net purchases (LHS) Q4 2020 Q1 2021 Q2 2021f Q3 2021f Q4 2021f Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: ECB, NTMA Calculations Notes: Forecasts sees Ireland's capital key of 1.69% and assumes 90% of new purchases will be for public sector assets with 7% of public sectors assets being supranational issuers. 38 0 60 76 70 50 40 30 20 10#39Diverse holders of Irish debt - sticky sources account for over 50%; will increase further with Eurosystem's PEPP Ireland roughly split 80/20 on non-resident versus resident holdings (Q3 2020) "Sticky" sources - official loans, Eurosystem, retail - make up over 50% of Irish debt 250 200 Other Debt (incl. IGBS - 150 Official) 27% Private Non Resident 33% 100 Retail, Resident 11% Eurosystem 22% IGBS- Private Resident Short term 2% 6% 50 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 IGBS Private Non Resident IGBS - Private Resident Short term Retail Eurosystem Other Debt (incl. Official) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency IGBS Private Non Resident Short term Retail Total Debt (€bns) Source: CSO, Eurostat, CBI, ECB, NTMA Analysis IGBS - Private Resident Eurosystem Other Debt (incl. Official) IGBS excludes those held by Eurosystem. Eurosystem holdings include SMP, PSPP and CBI holdings of FRNS. Figures do not include ANFA. Other debt Includes IMF, EFSF, EFSM, Bilateral as well as IBRC- related liabilities. Retail includes State Savings and other currency and deposits. The CSO series has been altered to exclude the impact of IBRC on the data. 39#40Investor base for Government bonds is wide and varied Investor breakdown: Average over last five syndications 11.8% 10.0% 46.6% ■Fund/Asset Manager Pensions/Insurance 31.6% Country breakdown: Average over last five syndications 8.8% 14.6% 24.0% 42.4% 7.2% Banks/Central Banks* Ireland ■ UK ■ Other US and Canada ■Nordics ■Continental Europe Asia & Other Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: NTMA * Does not include ECB. ECB does not participate on primary market under its various asset purchasing programmes 40#41Irish Sovereign Green Bonds (ISGB) - €6.1bn issued with €3.9bn allocated to green projects • • • Launched 2018 Based on ICMA Green Bond Principles - Use of proceeds model Governed by a Working Group of government departments and managed by the NTMA Compliance reviews by Sustainalytics Irish Rail train at Avoca on the Dublin to Rosslare route. Heavy rail was allocated some €400m from ISGBs in 2019 April 2021 Update €6.1bn nominal outstanding (€6.5bn cash equivalent) €3.9bn allocated to eligible green projects since inception €2.6bn remaining to be allocated to eligible expenditure in 2020 Issuance through two syndicated sales and one auction Pipeline for eligible green expenditure remains strong ISGB 2019 Allocation Report ISGB 2017/2018 Impact Report Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 41 13#42Allocation of ISGB funding has focused on Water/Waste management and transportation €2,300 €2,200 €2,100 €2,000 €1,900 €1,800 Allocation €million 2017/8 2019 2020frcst Construction of the new water treatment plant at Vartry (March 2020) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Allocation per eligible green category 2019 11% 35% 1% 8% 3% ■Built Environment/ energy efficiency ■Clean transportation Climate change adaptation 42% ■Management of living natural resources and land use Renewable energy ■Sustainable water and wastewater management 42 42#43Irish Sovereign Green Bond Impact Report 2018: Some 50 Impact measures reported Some highlights from Report* Built Environment/Energy Efficiency Energy saving (GigaWatt Hours) : 621.06 GHG emissions reduced/ avoided in tonnes of CO2: 150.5 Number of homes renovated : 27,549 Clean Transportation - - Number of public transport passenger journeys: 268.66 million Additional km of cycling infrastructure works (feasibility/design/ screening phase): 85km Take-up of Grant Schemes/Tax foregone. provided (number of vehicles): 15,712 Climate Change Adaptation (2017 and 2018) Number of properties protecting from flooding on completion: 7,403 - Amount of damages/ losses avoided on completion: €658 million Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 3 GOOD HEALTH AND WELL-BEING 7 AFFORDABLE AND CLEAN ENERGY 9 INDUSTRY, INNOVATION AND INFRASTRUCTURE 13 CLIMATE ACTION 11 SUSTAINABLE CITIES AND COMMUNITIES 1 NO POVERTY Waterford Greenway *For a more detailed break-down please see the ISGB 2017/2018 Impact Report here 43#44Irish Sovereign Green Bond Impact Report 2018: Some 50 Impact measures reported Some highlights from Report Environmentally Sustainable Management of Living Natural Resources and Land Use Number of hectares of forest planted : 4,025 Number of hectares of peatlands restored: 203 Renewable Energy Number of companies (including public sector organisations) benefitting from SEAI Research & Innovation programmes as lead, partner or active collaborators : 68 Number of SEAI Research & Innovation awards benefitting research institutions: 52 Sustainable water and wastewater management Water savings (litres of water per day): 79.1 million New and upgraded water treatment plants : 10 New and upgraded wastewater treatment plants: 11 Length of water main laid (total): 416km Length of sewer laid (total): 74km 2 ZERO HUNGER 15 LIFE 13 ON LAND CLIMATE ACTION 7 GOOD HEALTH AND WELL-BEING 6 CLEAN WATER AND SANITATION AFFORDABLE AND CLEAN ENERGY 3 W Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Irish peatlands 44#45Ireland rated in "AA" category by Standard & Poor's Rating Agency Long-term Short-term Outlook/Trend Date of last change Standard & Poor's AA- A-1+ Stable Nov 2019 Fitch Ratings A+ F1+ Stable Dec 2017 Moody's A2 P-1 Stable Sept 2017 DBRS Morningstar A(high) R-1 (middle) Stable May 2020 R&I A+ a-1 Stable Jan. 2021 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: NTMA 45#46Section 4: Structure of Irish economy Multinationals distort Irish economy picture but have added resilience during Covid-19 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency#47Multinational activity has distorted Ireland's data; notwithstanding those issues, MNCs have real impact Multinationals dominate GVA: profits are booked here but overstate Irish wealth generation Arts & Other 1% Professional services 9% Public sector 10% Domestic side of economy adds jobs; MNCs add GVA/high wages Gross Weekly Earnings € (Q4 Share of Employment Wage Bill Share of Share of GVA (2020) (2019) (2020) 2019) Agriculture 4.50% 1% 1% N/A Real estate 6% Industry (incl. Pharma.) 12.20% 15% 40% 916 Industry (incl. Pharma) 40% Construction 6.20% 4% 2% 821 Financia 1 & Dist., Tran, Hotel & Rest 25.40% 17% 9% 571 insuran ce 6% Dist, tran, hotel & rest 9% ICT (Tech) 5.40% 9% 16% 1,241 Financial 4.50% 8% 6% 1,235 Real Estate 0.40% 1% 6% 730 Construction. ICT (Tech) 16% Professional 10.80% 13% 9% 810 2% Agri, forest &. fish 1% Public Sector 25.60% 30% 10% 836 Arts & Other 5% 2% 1% 514 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO 47#48220 60 40 20 2005 2006 2007 140 120 100 80 2008 2009 2010 2011 2012 2013 Sizeable inflows of intellectual property into Ireland by tech. & pharma. in recent years: exports & jobs created Ireland is a leader in Computer Services; Exports have trebled since 2014 Enormous inflows of IP assets into Ireland since 2015 on the back of BEPS reforms 2014 2015 2016 2017 2018 2019 Computer Services Exports (€bn) Chemical Products (€bn) % of World Computer Services Exports (RHS) ....% of World Chemical Products Exports (RHS) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 18.0% 300 16.0% 14.0% 250 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% €billions, Constant prices 150 100 200 50 c. €500bn in IP assets transferred to IE since 2015 All 1995-2014 2015 2016-19 I 2015 once-off IP assets increase estimate I Fixed Capital Investment - IP assets Source: IMF, UN Comtrade, CSO, NTMA Economics Calculations 48#49-2 -4 -6 -8 -10 -12 -14 Malta Finland Belgium Luxembourg Spain France Portugal Cyprus Latvia Italy EA 19 Slovenia Austria Estonia Germany Netherlands Ireland* Greece Slovakia Lithuania 2 0 -1 Ireland has deftly navigated the changing global economy landscape this century (adjusted GVA for Ireland) Euro Area manufacturing base hollowed out over time: Ireland less impacted than most The digitalisation of the economy: Ireland able to grow its tech sector in recent years 3 2.5 Ireland: 3% of EA19 2 tech sector wages but only 1.4% of 1.5 EA19 population 1 0.5 0 -0.5 ■Manufacturing GVA: pp change in share of economy since 1999 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Tech Sector GVA: pp change in share of economy since 1999 Source: Eurostat, NTMA calculations (1999-2019 data) * 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 removed from the GVA data for the sectors in which MNCs dominate (parts of Manufacturing, ICT, and renting and leasing services). Unadjusted Ireland's figures are +7.1pp (manufacturing) and +6.5pp (tech sector). Spain Greece Lithuania Italy Austria Portugal France Belgium EA 19 Slovenia Germany Luxembourg Malta Slovakia Netherlands Latvia Finland Ireland* Cyprus Estonia#50Adjusting for MNC profits, underlying economy was robust pre-Covid: MNCs add real substance to IE economy Ireland's income = wages (all sectors) + domestic sectors profits + tax on MNC profits Pre-Covid, Ireland had a robust underlying economy; compared favourably to EA MNC sectors 250 contributed €17bn CoE in '19 200 150 100 30% 50 MNC Sector Profits, €142bn, 43% Three MNC sectors contributed €5bn in CT in 2019 Comp of Employee, €100bn, Domestic 0 T T 1995 1997 Index, Constant prices, 100 = 2008 1999 2001 2003 2005 2007 T 2009 2011 2013 T 2015 2017 2019 Sector Profits, €90bn, 27% Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency | MNC Sector Profits Domestic Sector Profits I Compensation of Employee Real GVA ex. MNC Sector Profits Real GVA EA19 Source: CSO, NTMA calculations (Nominal 2019 data used in left chart) 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 (MNC sectors = part of Manufacturing, ICT, and renting and leasing services). 50 50#51The result of such high value MNC activity in Ireland: Ireland less impacted by Covid - in particular the tax base GDP overstates Ireland's progress but is still a good barometer for Revenue, in particular CT and IT Multinational sectors critical for Income tax and Corporation tax: proven true in 2020 Income Revenue Elasticity GG Revenue Tax MDD 0.96 0.93 Corporate Tax 2.26 Ex. CT 100% 0.86 90% GDP 1.08 1.03 1.33 1.05 80% 70% 30% 20% 10% 0% -10% -20% Half of CT, PAYE, VAT -30% -40% comes from five least -50% impacted sectors* -60% 60% 50% !!!! 40% 30% 20% 10% 0% VAT PAYE CT Three taxes combined Construction) % of CT, PAYE, VAT y-o-y change in GVA (2020) Other Sectors I Financial and Insurance I Admin + support (incl. Aircraft Leasing) ICT (tech sector) Manufacturing (incl. Pharma) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO, Revenue, NTMA Calculations *Agriculture sector pays minimal tax Elasticity based on 1995-2019 data. E = (annual % change in tax)/(annual % change in growth variable) 51#52Outside of sector makeup, Ireland's population helps growth potential: Age profile younger than the EU average 70% Ireland's population estimated at 4.98m in 2020: younger population than EU Ireland's population will remain younger than most of its EA counterparts 60% 50% 40% 30% 20% Japan Greece Portugal Italy Spain Germany Finland France Denmark Ireland UK Belgium China Canada 10% Sweden USA World 0% <18 years 18-64 65+ 0.0 0.2 0.4 0.6 0.8 EA Ireland | 2018 Old Age Dependency Ratio 2045 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Eurostat (2020) CSO; OECD 62 52#53-100 -50 1987 1989 0 50 100 150 Migration has improved Ireland's human capital; post- Covid migration to be closer to zero given travel bans Latest Census data show net migration positive since 2015 - mirroring economy Migration inflow particularly strong in highly educated cohort - work in MNCs attractive 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Emigration (000s) I Immigration (000s) Net Migration (000s) ...Net Migration (% of Pop, RHS) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO 3.0% 120 90 2.0% 60 60 1.0% 30 0.0% 0 -1.0% -30 -2.0% -60 -90 -120 Third level Other Education Net Migration 2009-2013 ■2015-2019 53#54(0.02) (0.04) (0.06) (0.08) 0.02 France Ireland Greece Denmark Portugal Switzerland Italy 0.04 0.06 Income equality has improved: Ireland's progressive system the main driver and cushioned the economy in 2020 Lower inequality (1985-2015): economic rise reduced GINI coefficient unlike others Progressive system means Ireland is around the OECD average for GINI after tax USA Belgium Norway Japan Germany Luxembourg Spain Canada Netherlands Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: IMF, OECD Sweden UK Finland Austria 0.8 0.7 Lower GINI score means more equal society 0.6 0.5 0.4 0.3 0.2 0.1 0 Slovakia Slovenia Iceland Czech Rep Finland Denmark Norway Belgium Hungary Sweden Austria Poland Netherlands Germany. Switzerland Luxembourg Italy Canada Ireland Estonia Australia Portugal Russia Greece ueder Spain Israel Latvi Korea Lithuan Turkey: Mexico Costa Rica South Africa Pre Taxes and Transfers GINI Coefficient (Post Taxes and Transfers) 54#55Section 5: Brexit "Hard Brexit” risk eliminated by free trade agreement leaving smaller long term impact Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 1 Laketle#56Following intense negotiations, a Free Trade Agreement was agreed in December 2020 allowing for tariff free trade • Main points of FTA From January 1, the UK becomes a "third country" outside the EU's single market and customs union. As such without a free trade agreement, trade would be subject to tariffs and quotas. Under the deal, goods trade between the two blocs will 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 has been averted and the economic impact to Ireland will be more modest. Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency#57Impact of Brexit on Ireland will be net negative but deal means the shock is smaller and spread over long horizon Modelled impact on output versus No Brexit baseline: FTA reduces impact significantly IE trading partners: UK important for good imports (land bridge) & services exports -2 -3 -4 -5 -6 0 % of Goods total (2019) Services (2019) Total (2019) Exp. Imp. Exp. Imp. Exp. Imp. US 30.8 15.5 15.8 18.6 21.9 17.9 UK 8.9 20.6 15.8 6.9 13.5 10.6 (ex NI) NI 1.4 1.9 n/a n/a n/a n/a EU-27 37.1 36.7 29.8 19.8 32.8 23.8 China 5.9 5.8 2.8 1.3 4.0 2.3 -7 2020 2021 2022 2023 2024 2025 Other 15.9 19.4 35.9 53.4 27.8 45.5 FTA WTO Disorderly No-Deal Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CBI, NTMA analysis 57 40#58Imports more affected than exports in early 2021 by new trading arrangements In Jan. and Feb imports from UK fell sharply amid strong stock-piling pre-Brexit UK exit from single market will continue trend of lower goods trade between IE & UK 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 Exports to UK (3 month y-o-y change) Imports from UK (3 month y-o-y change) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO 2017 2018 2019 2020 60% 50% 40% 30% 20% 10% 0% 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 % of Irish agri exports going to UK % of other Irish goods exports going to UK Down 10% since Brexit vote 2010 2013 2016 2019 58#59One possible offset to Brexit impact is FDI inflows into IE; service suppliers in UK may need to re-establish in EU FDI: Ireland benefitting already Ireland could be a beneficiary from displaced FDI. The chief areas of interest are Financial services Business services IT/ new media. Dublin is primarily competing with Frankfurt, Paris, Luxembourg and Amsterdam for financial services. Companies that have indicated jobs have or will be moved to Ireland BARCLAYS Morgan Stanley citi Goldman Sachs J.P.Morgan 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. Bank of America Merrill Lynch S&P Global Ratings TD LEGG MASON GLOBAL ASSET MANAGEMENT BARINGS Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 59#60Withdrawal Agreement in 2019 solves Northern Ireland border issues Main points of Withdrawal Agreement 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 will be 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 this is backed by a layered consent mechanism, which allows Stormont to opt-out under simple majority at certain times. Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 60#61Section 6: Property Signs of price increases amid delays in new house building Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency#620 40 40 20 20 60 2005 2006 120 100 80 60 2007 2008 House prices had plateaued before the virus arrived; Covid price impact minimal but early 2021 saw increase House prices are 15-20% off previous peak Transactions returning after Covid impact and will improve as year progresses 2009 2010 National 2011 2012 2013 2014 2015 Excl. Dublin Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 2016 2017 Dublin 2018 2019 2020 70000 60000 50000 40000 30000 20000 10000 0 Q1 2011 Q4 2011 Q3 2012 Q2 2013 Q1 2014 Q4 2014 Q3 2015 14Q Sum of Transactions Source: CSO; BPFI, PPR, Department of Housing Q2 2016 Q1 2017 Q4 2017 Q3 2018 Q2 2019 Q1 2020 Q4 2020 Y-o-Y Change (RHS) 62 62 50% 40% 30% 20% 10% 0% -10% -20% -30%#63Covid-19 has impacted supply for 2020 and 2021 Housing Completions* close to 25,000 in 2020; 20,000+ in new dwelling completions 30000 25000 20000 15000 10000 5000 Housing supply picked up pre-Covid: coronavirus to hamper supply for 2020-22 30000 25000 20000 15000 10000 5000 0 2015 2016 2017 2018 2019 2020 0 New dwelling completion Unfinished 2017 2018 2019 2020 2021 2022 Reconnection I Non-Domestic Starts (advanced 12 months) Completions (new dwellings) All connections Source: DoHPCLG, CSO, NTMA Calculations Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency * 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. **2021 completions forecasted down 10-20% on 2020 63#64Medium-term driver - Housing supply still below demand; supply was catching up before Covid-19 12 10 Thousands of housing units 80 6 4 N Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Border West 1111 Mid-West South-East South-West Average annual housing demand (2020-2030) I New Dwelling Completions (last four quarters) Dublin Mid-East Midland Source: CSO; NTMA analysis • Average annual housing demand (2020-2030) New Dwelling Completions (last four quarters) State 33.6 19.7 GDA 17.2 10.5 Ex-GDA 16.5 9.2 Greater Dublin Area (Dublin + Mid East) requires the majority of needed dwellings. 64#65Transactions falling off given Covid restrictions 120 100 80 60 60 60 40 40 20 Mortgage drawdowns (000s) rose from deep trough before Covid-19 impact 0 2006 2008 2010 2012 2014 2016 2018 2020 Residential Investment Letting Mover purchaser First Time Buyers Source: BPFI (4 quarter sum used) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Thousands Non-mortgage transactions still important; transactions hit in Q2/Q3 but rebound in Q4 20 18 16 14 12 10 6 4 2 O Q4 2010 Ma Q2 Q2 2011 Q4 2011 2012 Q4 2012 Q2 2013 STOZ ZO Q4 2013 Q4 2013 Q2 2014 מל לחזק Q4 2014 02 2015 STOZ ZO 04 2015 Q4 2015 022 Q2 2016. Q4 2016 Q2 2017 I Non-mortgage transactions Mortgage drawdowns for house purchase Non-mortgage transactions % of total (RHS) Source: BPFI; Residential Property Price Register 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 55 65#66Covid-19 impact on prices muted as both supply and demand impacted, but rents have come off highs House prices up 3.7% in the year to March 2021 Rents pressures returning - more so in the regions rather than Dublin 30% 20% 10% 0% -10% -20% -30% 2005 2007 2009 2011 2013 2015 2017 2019 National (Y-o-Y %) Dublin (Y-0-Y %) Ex Dublin (Y-o-Y %) Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: CSO; RTB 180 160 140 120 100 80 60 40 20 0 2005 2006 Prices were above rents 2007 2008 2009 2010 2011 2012 2013 2014 Rents (100 = 2005) Rents now well above prices 2015 2016 2017 2018 2019 2020 2021 Price 66#67Irish house price valuation metrics remained well below 2008 levels throughout last cycle 60% 40% 20% 0% Deviation from average price-to-income ratio (Q2 2020, red dot represent Q1 2008) 0 -20% BG SD OE NL LX NW DN FR ES IE PT EA UK BD GR FN IT Deviation from average price-to-rent ratio (Q2 2020, red dot represent Q1 2008) 100% 80% 60% 40% 20% 0% -20% SD NW BG UK LX FR DN ES NL IE OE FN EA BD PT GR IT Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: OECD, NTMA Workings Note: Measured as % over or under valuation relative to long term averages since 1980. 67#68Section 7: Banks & other Ireland's banks among best capitalised in Europe complete reverse of late 2000s Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Bircoad Ulster Bank#69Ireland's pillar banks in relative good shape to weather Covid-19 storm 3.0% 2.5% Banks profitable before Covid-19: income, cost and balance sheet metrics much improved. Interest rates on mortgages and to SMEs are still high compared to EU thanks to legacy issues and the slow judicial process in accessing collateral. An IPO of AIB stock (28.8%) occurred in June 2017. This returned c. €3.4bn to the Irish Exchequer: used for debt reduction. Further disposal of banking assets unlikely in the short term given low valuations Ulster Bank (no govt. ownership) has decided to leave Irish banking market. Reduced competition is main impact. Ulster Bank's loans and deposits may be taken on by other institutions in market. Net Interest Margin 1.5 1 Profit before Tax 2.0% 0.5 1.5% 0 1.0% AIB BOI PTSB -0.5 0.5% -1 0.0% AIB BOI PTSB -1.5 2017 2018 2019 2020 2017 2018 2019 2020 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: Annual reports of banks - BOI, AIB, PTSB 69#70Estonia Ireland's banks are among the best capitalised in Europe 12 = 10 10 6 Leverage Ratio (fully phased-in definition) N 5 Greece Cyprus IE Lithuania MT LX Italy Spain FR Germany 4 10 12 14 16 18 20 22 24 26 28 30 30 Common equity Tier 1 ratio [%] Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency Source: ECB consolidated banking data (Q3 2020) Note: Leverage Ratio = Tier 1 capital/Total leverage exposure; CET1 = Common tier 1 capital/total risk exposures. "Fully loaded" refers to the actual Basel III basis for CET1 ratios. 70 10#71Capital ratios strengthened as banks shrunk and consolidated in last ten years CET 1 capital ratios allow for amble forbearance in 2020 Loan-to-deposit ratios have fallen significantly as loan books were slashed 20% 200 18% 180 160 16% 140 14% 120 12% 100 10% 80 17.3% 8% 15.6% 14.6% 15.1% 13.8% 13.4% 40 6% 862 60 20 4% 2% 0% CET1 % (Dec 2019) CET1 % (Dec 2020) AIB BOI PTSB Source: Published bank accounts 11 Loan-to- Deposit % Loans (€bn) Loan-to- Deposit % Loans (€bn) AIB BOI Dec-10 Dec-20 Source: Published bank accounts Note: 71 Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency "Fully loaded" CET1 ratios used. Refers to the actual Basel III basis for CET1 ratios.#72Mortgage arrears have not reversed course yet but we will know more on asset quality when economy re-opens Mortgage arrears (90+ days) 12.0 3500 Repossessions* 20% 18% 6.0% 10.0 3000 5.0% 8.0 16% PDH Arrears 6.0 2500 14% (by thousands) 4.0% 4.0 12% 2000 2.0 3.0% 10% 1500 0.0 8% 2.0% -2.0 1000 6% -4.0 1.0% 4% 500 -6.0 2% -8.0 0.0% 0% 10 TTTTTT 10 11 12 13 14 15 16 17 18 19 20 PDH + BTL (by balance) PDH + BTL (by number) 11 12 13 14 15 16 17 18 19 20 Over 90 days 190-180 days 181-360 days >720 days 361-720 days PDH BTL 13 14 15 16 17 18 19 20 % of MA90+ (RHS) -Total change Source: CBI Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency * Four quarter sum of repossessions. Includes voluntary/abandoned dwellings as well as court ordered repossessions 72#73The European Commission's ruling on Apple annulled in court; further appeal by EC means case continues • • Back in 2016, the EC had ruled that Ireland illegally provided State aid of up to €13bn, plus interest to Apple. This figure is 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, 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 in July or by the Commission's decision to appeal. Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 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