Irish Exporters Association Year End 2011 Review Calls for a Major Rethink of Export Strategy

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The Irish Exporters Association (IEA) issued today (9th January) its Review of 2011 and Projections for 2012 which showed that exports slowed down substantially in the second half of the year, and look set for further contraction in the New Year. However, because of the rapid international trade expansion in the first half of the year, exports for the full year increased by just under 5% to €171 billion which represents a very substantial increase of €8 billion in the year. The IEA warned however that the outlook for next year was for sluggish growth, which will delay most companies from adding more staff. Of particular concern according to the IEA was the limited success to date in the fast growing BRIC markets ( Brazil, Russia , India , China), which still accounts for less than 4% of Irish exports .The IEA warned that we are already playing catch up with most of our competitors in these markets , and that a comprehensive rethink of the Governments export strategy was now needed to help exporters target these high growth economies , leap frogging the competition and delivering growth not just next year but over the next decade when Europe is expected to decline.

According to John Whelan , Chief Executive of the Irish Exporters Association (IEA); ‘’We cannot underestimate the challenges ahead for exporters , particularly in the light of continued uncertainty around the resolution of the Eurozone debt crises , and the fragility of the UK’s economic recovery . Steps must be taken to support those companies looking to target markets in the rapidly growing economies in Asia , Middle East and Africa , particularly small and medium businesses , who must be supported to take risks and seek out new markets’’
Mr. Whelan went on to say; ‘’A number of major roadblocks have been identified which will stand between Irish exporters and success in international markets. For a start, contraction of Eurozone economies seems unavoidable and it now seems quite likely that the UK will fall into recession over the next twelve months”. These two regions currently account for a combined €95.2 billion or 56% of Ireland’s exports of goods and services. Contraction in the Eurozone and recession in the UK will inevitably mean that demand for exports of goods and services from Ireland will fall.

Irish exports to the fast growing emerging BRIC markets ( Brazil, Russia , India , China) account for less than 4% of total Irish exports of goods and services and grew by less than 5% in 2011 , whereas the EU27 member states managed to increase their exports to these markets by 22.5%.
The IEA, therefore, is forecasting a 3% growth in total goods and services exports for 2012, with a heavy reliance on the continued success of the IDA in attracting and retaining the global services corporations from the US to provide the forward momentum. John Whelan noted that this level of growth is significantly below the 5% level of export growth needed to meet Irish economic and employment recovery levels implicit in the EU/IMF programme targets and will put additional pressure on public expenditure cutbacks to ensure debt to GDP benchmarks are adhered to.

Keys statistics from the IEA 2011 Review were;
• Merchandise exports increased by €3.1 billion or 3.5% in the year to reach a total of €92.5 billion.
• The fastest growing merchandise sector was agri-food which grew by just over 10%, an increase of €715 million on the year to bring total exports to €7.7 billion.
• Mr Whelan noted that growth of this magnitude represents a very positive move towards the national Food Harvest goal of reaching exports of €12 billion by the year 2020. “Encouragingly, the strong export growth in the sector was not limited to the major food processing groups such as Glanbia, Kerry Group and Aryzta , but also in the return to the farming communities which saw incomes rise by 33% in the year,” said Mr Whelan.
• The largest manufacturing sector in Ireland – pharmaceutical/chemical – grew by 8% to €56.7 billion, which represents 61% of total merchandise exports.
• Computer hardware exports stopped their slide of recent years and grew by 1% which represented the first increase for the sector for many years and hopefully reflects the end of a period of consolidation and the reaching of the sustainable base level of activity we can expect in terms of exports from the sector.
• Services exports continued their steady growth in the final quarter of the year to bring the full year exports to €78.7 billion. This represented an increase of 6.6% on the prior year.
• Services exports now account for 46% of total exports from Ireland.
• Computer services is the largest of the services exporting business activities and during 2011 it powered ahead by 12% to reach €31.6 billion in export sales.
• Business services the second largest services sector grew at a much slower rate of 0.5% to reach export sales values of €22.4 billion.
• All the other services export activities grew robustly in the year including the IFSC financial services and insurance services businesses.

Potential Growth Areas
Most international economic analysts are now forecasting a GDP average growth rate in 2012 of minus 0.2% for the Eurozone, a plus 1.6% for the US and a plus 1.3% for other developed markets. “So if growth in Irish exports is to be achieved Irish firms must increasingly look at non-traditional markets,” said Mr Whelan. There is a forecast for a 7% growth rate for emerging markets of Asia and a 4% growth rate for the Middle-east and Africa. “Irish export industry must, as a matter of urgency, diversify its export client base to include a high level of sales to emerging markets where economic growth is strongest and least affected by sovereign debt and banking concerns,” said Mr Whelan.

The Irish Exporters Association believes that in the current economic climate Irish Government and state promotional agencies will need to be extraordinarily supportive of businesses to ensure export growth continues. “A premium return can be expected from support to business to expand in the fast growing emerging markets, particularly the BRIC (Brazil, Russia, India and China) economies,” said Mr Whelan.

Mr Whelan concluded by saying that 2012 will be a difficult and uncertain year and he noted that while there will be growth that it will be fragile and uneven. Mr Whelan praised export companies for their efforts in improving competiveness in recent years. He added: “In an increasingly competitive international trading environment it is essential that Irish exporting companies continue to find ways to reduce costs and increase output per employee to maintain existing customers and to develop new ones.
Export growth will not happen without businesses taking risks, calculated risks of course, and State agencies, banking and insurance services must be there to support this risk taking”.



ENDS
For Further Information contact: Mr John Whelan
Telephone: 087 927 1243
Email: johnwhelan@irishexporters.ie