Oil prices ‘will lead to hard times’

RISING oil prices and the continued strength of the euro will make the next six months a difficult period, the group representing Irish exporters warned yesterday.

The Irish Exporters Association (IEA) said exports in the first half of 2004 stood at €41 billion, 2% more than the same period last year, but that trends in recent months were heading in the wrong direction.

IEA chief executive John Whelan said the revival in exports had been cut short by concerns over oil and international security. Irish businesses had lost market share in Britain and America as a result of the euro’s strength, but there was good news from markets in the eurozone as exports to these countries went up by 11%.

Mr Whelan said the return to export growth in the eurozone was welcome, with France, Italy and the Netherlands all showing growth. But exports to Germany continued to slip, which Mr Whelan blamed on poor economic conditions that showed few signs of picking up.

Exports from Ireland were up 5% in the first three months of the year, but figures from the second quarter were less encouraging and were 1% below 2003 levels. “As 2003 was a particularly bad year for exporters, a more important measure is against 2002 and on this comparison we are still down 16% on the 2002 base line,” said Mr Whelan. Irish exports peaked at €49 billion in the first half of 2002, according to the IEA.

Mr Whelan said there would be no increase in exports in the rest of 2004 unless there was a “significant” swing in exchange rates to make eurozone-produced goods more competitive, as well as a return to normality in world oil markets. Fifty-six per cent of Irish exports go to countries outside the eurozone. The United States accounts for 20% of Irish exports, while Britain takes 18%. Bank of Ireland Global Markets’ John Moclair said currency markets were looking less certain than in recent months. Exporters faced a “double whammy” if they failed to protect themselves from currency risks at a time when their margins would be squeezed by higher oil prices, he said.

Exporters did well in Asian markets in the first six months of the year, as sales increased by 11%. Mr Whelan said this eased concerns that economic growth in China would threaten Irish exporters by increasing competition in the region. There was also evidence that economic recovery in Asia had resulted in more demand for hi-tech products, he said.