Section 1 Macroeconomic Developments

Section 2 Macroeconomic Outlook

Section 3 Developments in the Public Finances

 Economic Growth in Ireland’s trading partners is
generally picking up…
US UK Euro area
Key Points US GDP PMI UK GDP PMI Euro Area GDP PMI

1.4 58 1.0 58 1.2 58

• US growth
rebounded in 1.2 57 0.9 57 57
1.0
the second 1.0
56 0.8 56 56
quarter while 55 0.7 55 55
0.8 0.8
Euro area
0.6 54 54

q-o-q growth
54

q-o-q growth
q-o-q growth

growth 0.6
continues to be 53 0.5 53 0.6 53
0.4
solid 52 0.4 52 52
0.2 0.4
51 0.3 51 51
• However, UK 0.0
50 0.2 50 50
growth has 0.2
-0.2
slowed 49 0.1 49 49

markedly in the -0.4 48 0.0 48 0.0 48

2014 2014 2015 2016 2017 2014 2014 2015 2016 2017
first half of Q1 Q4 Q3 Q2 Q1
2014
Q1
2014
Q4
2015
Q3
2016
Q2
2017
Q1 Q1 Q4 Q3 Q2 Q1
2017

4 | OUTLOOK 2018
Underlying exports remain very strong…

Key Points
Contribution to nominal export growth
15
• Contract manufacturing
continues to weigh on Services Customs CM Total
export growth 10

• However underlying
exports i.e. excluding
5
contract manufacturing,
continue to perform very
strongly
0

-5

-10
2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2

5 | OUTLOOK 2018
Investment volatility driven by intangibles…

Key Points Contributions to Investment, pp

B&C Core M&E Aircraft Intangibles GDFCF

• Investment very 100

volatile reflecting
inter alia
80
intangibles
investment
60
• However,
underlying 40
investment
remains robust
20
driven by
building and
construction 0

-20
2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2

6 | OUTLOOK 2018
Consumer Spending softening since 2016 but
remains reasonably solid…
Key Points Retail sales
9
• Retail sales are up 3.3 per
Retail sales Core retail
cent January – August y-o-y 8

• New private car licensing has 7

been weak this year with
consumers shifting towards 6

y-o-y change
used/imported cars which in
5
part reflects the appreciation
of the euro against sterling. 4
This has acted as a drag on
retail sales 3

• Core retail sales, which 2

exclude car sales, are up 6.6

1
per cent January – August y-
o-y 0
2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 July August

7 | OUTLOOK 2018
Continued momentum in the labour market…

Key Points 4.0 13

• Employment levels have

increased by 13 per cent 3.5
12
since the low-point in 2012
(+ 230,000 jobs) 3.0
11

employment growth, y-oy (%)

• Growth remains broad

unemployment rate (%)

2.5
based with all sectors 10
posting employment gains
2.0
relative to trough levels
9
1.5
• The number of unemployed 8
continues to decline, falling 1.0

to 133,200 in September
7
with the unemployment rate 0.5

at 6.1 per cent

0.0 6
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2014 2015 2016 2017

Employment Growth (lhs) Unemployment Rate (rhs)

8 | OUTLOOK 2018
Euro-sterling exchange rate developments continue
to weigh on consumer prices in Ireland…
Key Points Core v Headline HICP Quarterly Profile
2.0

• Annual inflation in Ireland on a 1.5

HICP basis has averaged 0.2
per cent over January – August
1.0

• Core inflation, which excludes

0.5

Contrubution (%)
energy and unprocessed food, 0.4

averaged -0.1 per cent over the 0.0 0.1

0.0
same period -0.1
-0.2
-0.3 -0.3
-0.5
• Exchange rate developments
primarily felt through Non-
-1.0
Energy Industrial Goods (NEIG)
reflecting the importance of the
-1.5
UK as a source of imports for
these products
-2.0
2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3

Unproc. Food Processed Food NEIG Energy

Core Services Rents All HICP Core

9 | OUTLOOK 2018
Section 1 Macroeconomic Developments

Section 2 Macroeconomic Outlook

Section 3 Developments in the Public Finances

Budget 2018 Macroeconomic Outlook…

11 | OUTLOOK 2018
Section 1 Macroeconomic Developments

Section 2 Macroeconomic Outlook

Section 3 Developments in the Public Finances

Tax performance year to date…

Key points Tax Receipts vs Profile

9,000
 Tax revenues of €35.2 8,000

billion were received to 7,000

end Q3 2017. This is 6,000

€ millions
marginally below target 5,000

4,000
(down 0.6% of €0.2
3,000
billion). 2,000

1,000
 In year-on-year terms, tax 0
revenues are up 5.4% or Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Total Taxes 2017 receipts 2017 Profile

€1.8 billion.

13 | OUTLOOK 2018
Budget 2018…

 Budget Day Package of approximately €1.2 billion, net of €180 million

allocation to Public Services Stability Agreement, distributed on a 70 :
30 basis between expenditure and tax.
 Total revenue reductions of €335 million are offset by €830 million of
revenue-raising measures. This gives a net revenue package in Budget 2018
yielding €495 million.
 On the spending side, there will be an expenditure increase of the order of
€1.1 billion.
 Ireland is forecast to comply with both pillars of the preventive arm of the
Stability and Growth Pact. The estimated improvement in our 2018 structural
balance is 0.6% of GDP, as required under the Stability and Growth Pact.

14 | OUTLOOK 2015
general government balance…

Key points 2.0%

general government deficit
0.8%
 General government 0.0%
0.3%

deficit of 0.3% of GDP -0.7%

-0.3% -0.2% -0.1%
-2.0%
forecast for 2017, -1.9%

improving to 0.2% of GDP -4.0% -3.6%

% of GDP
in 2018. -6.0%
-6.1%

 A general government -8.0%

-8.0%

surplus is forecast from -10.0%

2020. -12.0%

-12.7%
-14.0%
2011 2012 2013 2014 2015 2016 2017f 2018f 2019f 2020f 2021f

15 | OUTLOOK 2015
general government debt…

Key points 140.0%

general government debt

 Debt ratio peaked in 2012 / 120.0%

2013.
100.0%

 Significant decline in 2015 debt

80.0%
ratio - primarily due to the large

% of GDP
revision to 2015 GDP in the 60.0%

National Accounts. 40.0%

 Decline in debt-to-GDP ratio 20.0%

expected to continue over the

0.0%
forecast horizon. 2009 2010 2011 2012 2013 2014 2015 2016 2017f 2018f 2019f 2020f 2021f

16 | OUTLOOK 2015
structural deficit improvement…
1.5

1.0
Key points
0.5  Average annual structural
0.0 improvement of 0.6 per
-0.5
annum over 2017-18
-1.0  Achieve a balanced
-1.5
budget in structural terms
-2.0
(i.e. reaching MTO of -
0.5% of GDP) by 2018.
-2.5

-3.0

GGB (as % of GDP) Structural Balance (as % of GDP)

17 | OUTLOOK 2015
 Getting Ireland Brexit Ready
 By ‘balancing the books’ in 2018 the public finances will be better placed to withstand Brexit-
related fiscal shocks. Establishment of a ‘rainy day fund’ provides a further counter-cyclical
buffer

 Doubling of capital investment between 2015 to 2021 from €3.7 to €7.8 billion - boosting the
growth potential of the economy

 Retention of the 9% VAT rate in the hospitality sector will reduce the impact of currency volatility
in the wake of the UK’s decision

 Improve the competitiveness of our personal tax system through income tax reform

 Key Employment Engagement Programme – new incentive to attract key employees

 €300m Loan Guarantee Scheme for Brexit-impacted businesses – supported by the EIB Group,
the European Commission and the SBCI. Q1 2018 launch.

 Development of a new complementary €25m Agriculture Brexit Loan Scheme(s) for: a

combination of primary producers and food businesses.

18 | OUTLOOK 2015
Budget 2018 Fiscal Outlook…

2016 2017 2018 2019 2020 2021

General government balance

-0.7 -0.3 -0.2 -0.1 0.3 0.8
(% of GDP)
General government primary
1.6 1.7 1.7 1.7 1.9 2.3
balance (% of GDP)

Debt-to-GDP ratio 72.8 70.1 69.0 67.1 63.5 61.2

Debt-to-GNI* ratio 106.0 106.5 104.7 101.8 96.4 93.1

Structural Budget Balance

-1.7 -1.1 -0.5 0.2 0.5 0.9
(% of GDP)

19 | OUTLOOK 2015
Department of Finance
Government Buildings
Upper Merrion Street
Dublin 2
Ireland
www.finance.gov.ie
@IRLDeptFinance

This presentation is for informational purposes only.

No person should place reliance on the accuracy of the data and should not act solely on the basis of the presentation itself.
The Department of Finance does not guarantee the accuracy or completeness of information which is contained in this document and which is
stated to have been obtained from or is based upon trade and statistical services or other third party sources. Any data on past performance
contained herein is no indication as to future performance.
No representation is made as to the reasonableness of the assumptions made within or the accuracy or completeness of any modelling, scenario
analysis or back-testing.
All opinions and estimates are given as of the date hereof and are subject to change.
The information in this document is not intended to predict actual results and no assurances are given with respect thereto.