Exports ‘cannot be sole beacon for growth’

EXPORT performance cannot continue to be relied upon as the sole driver of the country’s economic growth, representatives have warned.

Responding to news that the IMF has cut its 2011 growth forecast for Ireland’s economy — from 1% to 0.5% — the Irish Exporters’ Association (IEA) said yesterday that exports cannot be expected to prop up GDP recovery on their own.

IEA chief executive John Whelan said: “Export businesses are also facing difficulties on international markets and are unlikely to contribute as strongly to Irish economic growth as originally forecast.”

Economists are expecting Ireland’s export performance to broadly mirror that of last year, with growth of 6%. However, the IEA said demand is weakening and Irish exporters’ cost competitiveness levels are being eroded by both fuel price escalation and unfavourable currency movements.

“The barrel of crude oil has risen by 18% since this time last year — with most of the increase arising since the turn of the year. This has filtered its way into transport, packaging and production costs,” Mr Whelan added.

He also noted that Irish export price competitiveness has been affected by the return to weakness in sterling, which has fallen by 3% against the euro since January and a similar weakening of the US dollar, down by 8% against the euro.

Mr Whelan added: “The hangover from the financial crisis is still with us globally, not just in Ireland. High unemployment in most of our major markets and sharp belt-tightening by governments, in order to bolster their Exchequer earnings, is dragging down consumer and private sector demand for exports.”

The World Trade Organisation has predicted a slowdown in world trade growth this year, to 6.5%; compared to 14.5% last year. This will be driven by rising fuel prices, political unrest and the natural disasters hitting Japan.

“In these circumstances, there is an urgent need for the Government to roll out the promised initiatives outlined in its Programme for Government, but also we need some innovative new solutions to counter these unexpected developments,” said Mr Whelan.