IEA expects export growth rate this year to be halved

Export growth rate in 2001 is expected to be half that of last year as a result of the US slowdown, the Irish Exporters Association has warned.

It said the continued high export growth rate reported in the first quarter of 2001 is unlikely to be repeated in the second quarter and forecasts a halving of the rate to 12.5 per cent for 2001.

The technology sector is forecast to show the biggest export reduction, averaging a decline of 25 per cent in the second quarter and further reductions through the balance of the year. A pick up is not expected until 2002.

The sector is dominated by a few global players and the slowdown in international demand, sparked by the US economic downturn, is expected to affect sales directly, the association said.

"All indications are that the US economy has had a hard landing and the consequences of this are slowly working into European and Asian markets which are main destinations of technology exports," it said.

The indigenous Irish sector is highly exposed to a downturn in the technology sector, with many of the State's high growth indigenous start-up companies in this sector, the association said.

The technology sector also supports many indigenous Irish exporters who supply those multinationals at home and abroad.

"An urgent requirement exists to help these indigenous companies reposition themselves before the sector reaches full downturn," the association said.

However, the pharmaceutical/ chemical sector was less vulnerable to economic downturn, with demand being fairly inelastic and a much broader spread of exporting companies out of Ireland.

Export growth in this sector has averaged 40 per cent growth year on year, according to the association, which expected the trend to continue through the current year.

But it said there had not been enough focus on this sector by development agencies. The effect of a US downturn on the strength of the dollar was also a major concern.

"While the dollar has remained strong to date, it is unlikely to remain so if the US economy stagnates," it said.

"As UK sterling often follows the dollar in foreign exchange markets, a weakening of the dollar is likely to be accompanied by a strengthening euro against sterling."