Source: CSO

The CSO said today that Irish merchandise exports held steady in the third quarter but sales to the UK plunged 18% in the 12-month to August, hit by a high Euro/Sterling rate and a recession economy. Meanwhile, the Irish Exporters Association (IEA) today said that Irish exporters were finding it increasingly difficult to get credit insurance on their exports to Russia, Central America, South America, and Eastern Europe.

Seasonally adjusted imports fell by 5% in September relative to August 2008. Relative to July 2008, imports fell by 11% in August. Exports held steady over the three months June to September 2008.

On an unadjusted basis, the value of imports in September 2008 was down 11% on September 2007, while the value of exports was down 1%.

The value of imports in August 2008 was down 17%, and the value of exports was down 6% on August 2007.

The January-August figures for 2008 when compared with those of 2007 show that:

Exports decreased from €59,818m to €57,277m (-4%) –

Computer equipment decreased by 26%, Organic chemicals by 8%, General industrial machinery by 13% and Metalliferous ores by 20%.

Chemical materials increased by 38%, Medical and pharmaceutical products by 9%, Professional, scientific and controlling apparatus by 20% and Petroleum products by 53%.

Goods to Switzerland decreased by 17%, the Netherlands by 16%, Germany by 9%, Great Britain by 3% and the Philippines by 50%.

Goods to China increased by 22%, Malaysia by 50%, Spain by 8% and Poland by 31%.

Imports decreased from €41,820m to €39,065m (-7%) –

Computer equipment decreased by 25%, Road vehicles by 19%, Special purpose machinery by 17% and Electrical machinery by 13%. Petroleum products increased by 17%, Natural gas by 39%, Fertilisers by 66% and Medical and pharmaceutical products by 10%.

Goods from Great Britain decreased by 5%, China by 17%, France by 17%, Taiwan by 31%, Japan by 23%, Norway by 20% and Germany by 9%.

Goods from Denmark increased by 43%, the Netherlands by 8%, Poland by 49%, the United States by 2% and Finland by 36%.

Dr Ronnie O'Toole, National Irish Bank economist commented:

Exports to UK Suffer from Sterling effect ....
The steady total performance of aggregate Irish exports masks widely different performance in different sectors. On the one hand, the pharmaceutical sector - which is dominated by foreign multinationals - continues to perform well, and has seen strong growth in sales in August compared to 2007. On the other hand, the impact of the weak sterling on the competitiveness of Irish exports is now coming through more strongly in the official numbers. Sales to the UK in August were almost 20% lower than the same month in 2007.

This will particularly impact on Irish indigenous exporters, rather than multinationals. Approximately half of all Irish indigenous exports are to the UK, with nine out of ten of such exporters having some trade exposure to the UK. Although Ireland is much less exposed to the UK than previously, exporters to the UK tend to be relatively labour intensive. As such, while the impact on aggregate exports may be minor, the effect on employment in the export sector could be more significant.

... and this trend will continue next year.
Forecasts suggests a deep UK recession coinciding with a £/€ rate hovering below 85p. This is equivalent to IEP£1.08, the same level reached in the months following the withdrawal of Sterling from EMU in September 1992 and before the 10% devaluation of the punt at the end of January 1993. This makes Irish exports less competitive in the UK. More generally, purchasing manager indices of export orders globally point to a difficult 2009. The indications are that along with the UK, export markets in Eastern Europe and the US are likely to be particularly affected.

.... though imports are continuing to fall.
The weakness of imports is because of the decline in consumer demand, the contraction of the electronics industry (which imports a lot of components) and the fall in the price of energy globally. On a seasonally adjusted basis, the import total in September was the lowest since 2004. The impact of the fall in energy prices is the biggest plus coming through in the import figures. Ireland's petroleum bill has fallen to just over €300 million in August, from €550 million in May.

The Irish Exporters Association (IEA) today advised that Irish exporters were finding it increasingly difficult to get credit insurance on their exports to Russia, Central America, South America, and Eastern Europe. There are also many cases of existing cover for exports to these countries being withdrawn by insurers. These markets although more risky, are currently offering some of the best export growth opportunities.

John Whelan, Chief Executive of the IEA stated: ‘'In a period when credit is restricted from the banking sector internationally, any lack of any export credit insurance means that it becomes almost impossible for Irish exporters to trade in these markets.

‘'Under these circumstances the Government must intervene in the market, to provide complimentary cover when the credit insurance industry withdraws cover.''

He concluded by saying: ‘'If Ireland is to have any chance of recovery in these traumatic times it will be down to the export sector, both foreign owned and the indigenous exporters. But credit support in guaranteeing the exporters efforts must be available.''

The IEA went on to point out that today the French Government announced that they will provide a state-backed credit insurance scheme to companies left without cover because of rising fear of bankruptcy.

The French Ministry of Finance stated that the Caisse Centrale de Réassurance, a publicly owned insurer of last resort, will ensure that suppliers remain covered against their customers' potential failure to pay bills. This is the latest in a string of initiatives by the French Government to support business as the economy heads into recession.

In conclusion , the IEA urge the Government to put aside their decades old refusal to enter the export credit guarantee market because of a potential abuse of a Government backed scheme . These are difficult times and exporters need fresh solutions to today's trade finance and market risk problems .

In particular , Irish exporters must not be left out on their own , when exporters in other countries are receiving state export guarantee backing .