Irish exporters felt the full impact of the economic downturn in global markets losing 9.6% of export value in the first quarter according to the latest statistics in the Irish Exporters Association’s first quarter report for 2009, published today. Total exports for the first quarter of 2009 stood at €33.78 billion down from €37.38 billion in the same period last year. The IEA forecasts total exports will fall by 13% in 2009, with services plunging by 20%. The industry group said the UK market will take 53% of exports from Irish-owned firms while the growth in the merchandise sector, has been camouflaged by US-owned pharmachem/medical devices sectors, which account for 60% of merchandise exports.
The IEA says that unless the Government provides some additional stimulus for the sector that the prognosis for the full year is that exports will continue to decline at an accelerated rate leading to substantially increased unemployment in the sector.
According to John Whelan, Chief Executive of the IEA, the Association’s forecast for the full year is for exports to fall by 13%, with a loss of export revenue of €20.2 billion and direct job losses of some 91,000. “The knock-on effect of job losses on this scale on the economy, however, is much greater as each export job supports two other jobs in the community,” he added.
The IEA says that indigenous exporters have been particularly affected by the effective 21% depreciation in the value of sterling against the euro over the past 12 months. “Indigenous exporting companies, which traditionally have a high labour content, depend on the UK market for 53% of their sales. We believe that the worse is yet to come because many companies have not yet fully factored the sterling fall into their sales pricing,” said Whelan. He added that when this occurs indigenous exporters can expect a further loss of competitiveness in the UK, a fall in sales and a further decline in employment.
Merchandise Exports showed a decline of 3.4% in the first quarter. However, the IEA says what seems as a modest decline is being camouflaged by the growth, mainly from multinational companies in the pharmachem and medical devices sectors which are virtually recession proof. The Table below shows the performance of Ireland’s main merchandise exports, with continued growth of the Pharmaceutical, chemicals and Medical devices sector , which now account for 60% of total merchandise exports. But the Agri / food sector exports fell by 15% and Beverages by 9%, both are labour intensive and heavily exposed to the UK market and the sterling depreciation.
The Review shows just how much export business has been lost in the UK with falls of 11.7%, much of which can be accounted for by the depreciation of sterling. Exports to Northern Ireland fell by almost 25%. However, the IEA says even in Eurozone markets where exchange rates are not an issue the demand for Irish products fell by 9.7%, reflecting the general impact of the recession internationally. Our rapid rise of sales to China over the past decade came to a sudden and sobering end in the first quarter with exports falling by 21.3% .This fall reflects, to a great degree, the restructuring of global supply chains already being implemented by the multinationals in response to the global recession.
The IEA outlook for services deteriorated sharply in the last quarter of 2008 and continued into 2009. Services exports which since the turn of the decade have been the primary driver of export growth in Ireland were heavily affected by the rapid deteriorating in global economic conditions and the collapse of Lehman Brothers in the US last September, which triggered a free fall in many of the financial products, traded internationally where Irish operators were major players.
The quarter on quarter export loss was 18% ,with services exports falling to €13.0 billion, which is down by €2.9billion for the quarter compared to the same period in the prior year. The fall in the value of sterling also had it’s affect on our services exports ,as the UK is by and away the largest of our services markets taking 20% of output from the sector.
However, the largest services exports sector is in Computer Services which fell by only 9% to €5.2 billion. This sector continues to attract major international corporations, with Face Book, Paypal, e-Bay, Google continuing to expand here, adding to the longer term major players such as Microsoft, HP Services centre, and Intel R& D centre of excellence facilities. The sector now accounts for 40% of total Services exports.
Business services, the second largest sector of the Services exports, fell by 38% as markets in aircraft leasing, ship leasing where we are in the top 5 internationally, and general consultancy collapsed.
Turnover in the Transport sector fell sharply by 30% in the first quarter, as many in the sector providing import services for the construction sector saw their markets vanish. The biggest loser in the first quarter was in the Financial Services sector , which fell by 50% as turmoil in the UK and US markets led to global failure and the elimination of many hedge fund and derivative products that the sector traded in.
The Review should be available here on Thursday or contact email@example.com for a copy.
Finfacts Analysis on Irish Exports: Home Truths on Irish Exports as Ireland faces a changed global economy in the decade ahead