Euro zone troubles will negatively affect Irish exports in the coming quarters, though Ireland’s improving competitiveness may help to offset the challenges, according to a new report.
The inaugural Investec Ireland Export Analysis Report (I –EAR) published this morning, showed that Ireland’s exports continued to grow in the third quarter of this year, rising by 0.4 per cent. The total value of exports in the third quarter stood at €22.7 billion, 1.7 per cent higher than last year.
The growth in US GDP was the main driver of the rise in the I-EAR index in the last quarter. The US accounts for a quarter of Ireland’s merchandise exports and is the Republic’s largest trading partner. However, the report warned that future readings are likely to be weaker, as the euro zone crisis intensifies.
“Ireland’s export environment looks set to remain challenging in the months ahead with Ireland’s major euro zone partner economies set to contract or stagnate”, the report states.
Nonetheless, Investec contends that the slowdown in the economies of Ireland’s trading partners is being offset by an improvement in Ireland’s competitiveness. Citing data from the Central Bank’s Harmonised Competitiveness Indicator (HCI) which shows that Irish goods have cheapened by more than 6 per cent over the past two years, Investec said the “continued improvement in cost competitiveness is likely to enhance the resilience of the exporting sectors in the face of a more challenging external environment.”
The US, the UK and Belgium are the top three exporting countries for Ireland, according to Investec. As a proportion of Ireland’s top 15 export destinations, the US represents a 23 per cent share, the UK 20 per cent, and Belgium 18 per cent.
Ireland exports a significant amount of pharmaceutical products to Belgium, where they are packaged and exported to other countries, according to John Whelan of the Irish Exporters’ Association. Speaking at the launch of Investec’s report today, he said that Ireland’s pharmaceutical and life science industry, which is responsible for a huge percentage of exports, is reasonably well-prepared for imminent changes in the pharmaceutical industry as well-known drugs come off patent.
“The situation is not as serious as might have been a few years back” he said. “A number of large companies here have been moving into biologics in anticipation of the change, and Ireland now has one of the strongest clusters of biologics in the world.”
