Irish exports forecast to top €207bn this year
Analysis: Upbeat forecasts reflected in strong first-quarter export performance
Fast-growing medical devices, pharmaceutical, and computer software sectors are expected to drive most of the growth during the year. Photograph: Aidan Crawley/Bloomberg
Exports from indigenous businesses and multinationals are expected to exceed €207 billion this year, compared with €190 billion last year, based on current trends.
Since the start of 2015, each economic statistic has exceeded expectations. The government’s spring statement was upbeat, as were the global forecasts from the International Monetary Fund, the World Trade Organisation and the Organisation for Economic Co- operation and Development.
These improving forecasts have been reflected in a very strong performance by Ireland’s exporters, as seen in the first-quarter figures.
Enterprise Ireland – whose client companies accounted for €18.6 billion of exports last year – on April 30th released a 10 per cent export growth rate forecast for the indigenous sector for 2015, despite the small 3 per cent growth in first-quarter exports from the agrifood sector – the largest indigenous sector. However, the fast-growing pharmaceutical, medical devices and computer software sectors are expected to drive most of the growth during the year.
On balance, the export growth forecast I gave at the start of the year is now due an upgrade from 6.6 per cent to 9 per cent for 2015, taking the combined multinational and indigenous sector exports up to a forecast sales turnover of €207 billion in the year.
This year has started well for Irish exporters, with both goods and services exports registering very strong growth. Much of the buoyancy has come from the euro area, with demand for Irish exports up by 16 per cent in the first quarter over the same quarter last year.
The European Central Bank increased its growth forecast for the region in April, and seemed pleased with the impact of the quantitative easing (QE) programme of €60 billion monthly asset purchasing. The resultant – and expected – weakening of the euro, combined with the effect of the dramatic 45 per cent drop in oil prices over the past 12 months, has led to a surge in exports from the euro zone, including Ireland.
The US was exhibiting solid economic growth last year, and this has continued into 2015. The quarter-to-quarter 21 per cent fall in the value of the euro against the dollar gave a very competitive edge to our exports to the US, which increased by 18.7 per cent in the January-to-March period. This was more than double the average growth in exports achieved last year.
There was good news elsewhere too, with the Bank of England making an improved economic forecast for the UK. Again the QE programme underpinned the lowering in value of the euro against Sterling and, for the first time in three years, gave a boost to Irish exports to the market, which grew by 8.5 per cent in the first quarter. Following three years of falling exports to the UK, the solid first quarter growth is a very welcome sign that our biggest market outside the US has finally shown signs of full recovery.
Events in Greece and the Ukraine caused some concern in the quarter but, once a ceasefire was agreed in the Ukraine and Syriza in Greece showed a willingness to govern within acceptable credit limits, these concerns receded. However, the collateral damage in trade with Russia did not escape and Irish exports collapsed by 50 per cent in the quarter.
There is strong evidence of a “two-track world” taking shape, with the developed world powering ahead and the developing/emerging economies deteriorating. China hit the headlines in January after the authorities cut the country’s forecast for 2015 from 7.5 per cent to 7.0 per cent GDP growth – its weakest in 25 years. India also witnessed a slowing of growth to 7.5 per cent in the final quarter of 2014, a decrease from 8.2 per cent in the previous quarter.
In Brazil the economy continues to contract and inflation rose to 7.7 per cent in February. In South Africa the economy slowed to GDP growth of 1.5 per cent at the end of 2014 and is not expected to exceed this in 2015.
The impact of these changes was evident in the poor performance of Irish exports to the Brics countries (Brazil, Russia, India, China and South Africa) with exports down 1 per cent compared to the same quarter in the prior year. Fortunately, the Brics countries only account for approximately 5 per cent of total Irish exports, and hence a decline in exports to these countries, while worrying in the longer term, will not materially affect the current year forecast.
John Whelan is export sector specialist at AIB and a former chief executive of the Irish Exporters’ Association. The views expressed are his own.