Download Future Directions of the Irish Economy Roundtable: Policy challenges for the Irish economy

Diego Rodriguez Palenzuela
Head of Output and Demand Division
Directorate Economic Developments
Future Directions of
the Irish Economy
Roundtable: Policy challenges for the
Irish economy
10 January 2014
ARubric
significant increase of indebtedness
Indebtedness
(percentage of GDP, sa, quarterly)
500
450
2000
2004
2008
2012
2013
Government
Households
NFCs
400
350
300
no data available
250
200
150
100
50
0
Ireland
Portugal
Greece
Cyprus
Germany
France
Italy
Spain
Source: European System of Central Banks (ESCB), European Commission (Eurostat) and national data.
Note: Data refer to Q2 of the respective year. Last observation refers to 2013 Q2.
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2
Rubric
Recovery
in the economy gaining further traction
Real GDP growth
Unemployment Rate
(year-on-year percentage change and contributions) (percent of labour force, SA, monthly and annual)
10
euro area
16
Ireland
14
5
12
10
0
8
-5
-10
-15
6
4
Forecast
N et Exports
Domestic Demand
GDP
2
0
2007
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: European Commission.
Note: Last observation refers to 2012.
2008
2009
2010
2011
2012
2013
Source: Eurostat.
Note: Last observation refers to October 2013.
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Rubric
Significant
progress in current account adjustment
Current and capital account balances
(% of GDP)
12
2001
10
2013
2007
8
6
4
2
0
-2
-4
-6
-8
-10
-12
-14
-16
BE
CY
FR
FI
IT
GR
ES
EA
AT
PT
EE
MT
SK
IE
SI
LU
DE
NL
Source: ECB, Balance of payments. Note: 2013 refers to 2013 Q3 but for IE, CY and LU where it refers to 2013Q2. Countries ranked according
to current account in 2013.
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Rubric
Substantial
cost competitiveness adjustment - ULC
ULC developments relative to the euro area
(euro area=100)
120
120
115
115
110
110
CY
FR
GR
DE
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
ES
2001
2013
2012
2011
2010
2009
2008
2007
85
2006
85
2005
90
2004
90
2003
95
2002
95
2001
NL
100
PT
2003
100
IT
105
IE
2002
105
Source: Eurostat.
Note: Last observation refers to 2013 (estimate).
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5
Rubric adjustment was necessary
Fiscal
Government revenues collapsed dramatically in 2008 and expenditures reacted
only with a lag
Source: European Commission.
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6
Rubric adjustment delivered
Fiscal
Change in the primary structural balance
2013 primary government balance net of
support to the financial sector
(in percentage points)
(in % of GDP)
2013
2010-12
2010-13
16.0
3.0
14.0
2.0
12.0
10.0
1.0
8.0
0.0
6.0
-1.0
4.0
2.0
-2.0
0.0
-3.0
-2.0
GRPT ES SK IE IT FR EA SI CY NL BE AT DEEEMTLU FI
-4.0
GRPT ESSK IE IT FREA SI CYNL BE ATDEEEMTLU FI
Source: EC, November 2013. Note: Left chart - structural balances are adjusted for the impact of the cycles and for one-offs. Right charts countries ranked according to changes in primary structural balance in left chart.
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Rubric
Sharp
decline in the cost of government financing
Euro area sovereign bond markets
Changes in 10-year government bond yields
between November 2010 and January 2014
10-year government bond yields
(% p.a.)
(percentages)
1
Euroarea GroupA
GroupB GroupC
2014
0
-1
-2
-3
-4
-5
-6
-7
IE
SK GR ES PT BE MT AT
FI
IT
FR DE NL
SI
Source: Reuters
Note: For Estonia, Latvia and Luxembourg are no data available. January
refers to yields as of 7 January 2013. The yellow group comprises the
four EU/IMF programme countries and other countries currently under
financial market stress.
Last observation: 7 January 2014.
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Rubric
• Good
progress on banking sector
Eurosystem funding of Irish domestic
banks (bn EUR)
Loan to deposit ratio
160
ELA
140
OMO
190%
180%
120
170%
100
160%
80
150%
60
140%
130%
40
120%
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Source:. European System of Central Banks (ESCB).
Note: Last observation refers to 2013Q3.
Sep-11
100%
Jun-11
0
Mar-11
110%
Dec-10
20
Source: : CBI, PCAR banks.
Note: Last observation refers to 2013Q3.
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Rubric
Looking
ahead: Debt sustainability analysis
Government debt-to-GDP ratio on a declining path in baseline and
alternative scenarios
• Government debt ratio is
expected to peek in 2013 at
around 124% of GDP and
gradually decline thereafter.
• However, the government
debt path remains fragile and
sensitive to growth and
interest rate shocks.
• Continued fiscal
consolidation is necessary in
order to bring the debt ratio
to safer levels.
• Maintaining a sufficiently
large cash buffer is advisable
in order to increase resilience
to possible external shocks.
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Rubric
Looking
ahead: Addressing mortgage arrears
Mortgage level and arrears
(billions of euro, quarterly)
up to 90d
91 - 180d
180d+
Restructured*
In arrear
T otal Mortgages (rhs)
35
120
30
118
25
116
20
114
15
112
10
110
5
108
0
106
2010
2011
2012
2013
Source: European System of Central Banks (ESCB), European Commission (Eurostat) and national data.
Note: Data refer only to Principal Dwelling Houses.
*Restructured refers only to restructured loans not in arrear. Additionally mortgages in arrear worth 6.8 bn euro have been restructured in
2013 Q3. Last observation refers to 2013 Q3.
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Rubric
Looking
ahead: Unemployment
Youth and Long-Term Unemployment rate
(percentage of labour force, partly sa, quarterly)
euro area - Youth Unemployment (lhs)
Youth Unemployment (lhs)
euro area - Long T erm Unemployment rate (rhs)
Long T erm Unemployment (rhs)
35
7
30
6
25
5
20
4
15
3
10
2
5
1
0
0
2007
2008
2009
2010
2011
2012
2013
2014
Source: Eurostat.
Note: Youth unemployment is defined as unemployment of people aged 15 to 24 years. Long-term unemployment is defined as
unemployment lasting 24 months or longer. Last observation refers to 2013 Q3 for youth unemployment an 2013 Q2 otherwise.
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Rubric
Areas
where additional effort is advisable
A lot has been achieved so far; however, further progress
would be helpful in the following areas:
– Further reforms of sheltered professions such as
legal services.
– Reduction of costs and further efficiency gains in the
health care sector.
– Measures to tackle welfare traps that discourage the
taking up of employment opportunities.
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Rubric
Reserve slides
14
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Rubric
Deleveraging
of banks
Total loans to customers
(bn EUR)
120
2010
2013H1
100
80
60
40
20
0
AIB
BOI
PTSB
Source: CBI.
Note: Last observation refers to 2013 H1.
15
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Looking ahead: Bank profitability
Rubric
Profit before tax
Source: PCAR banks
16
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