Opinion: Mounting headwinds pose stiff challenge to Irish ‘golden export era’
Manufactured goods exporters led the drive with a massive growth in sales, powered by the pharmaceutical and medical devices firms who opted to expand in Ireland after the merger and acquisition flurry of recent years in the sector.
In fact, the only weakness was in the agri-food industry, but it still managed a small growth despite the damage from the dairy price collapse.
Services exporters in the software, business and financial services, inclusive of the buoyant aircraft leasing sector, mounted a solid double digit growth in the year.
The performance of indigenous exporters was overshadowed in the aggregate figures by the predominant foreign-owned high technology sector.
Nevertheless, these too had an exceptional year breaking through the €20bn barrier, aided by a competitive euro exchange rate and lower energy prices.
And whereas 2015 was a tremendous year for Ireland’s exporters, global market volatility, rising uncertainty on the UK staying within the EU, falling sterling and a weakening dollar have marred the beginning of 2016.
There are increasing signs that Ireland’s exceptional export growth may shudder with damaging consequences for jobs and the exchequer tax take to fund the recovery.
A clue to Ireland’s growth prospects in the coming year can be glimpsed from what is happening in some of our key export markets.
A group of five countries will be responsible for 75% of the world economic growth in 2016 — the US, India, China, the UK, and Germany.
In the past year, Ireland’s exporters have increased their market penetration into each of these key global growth economies.
In 2015, exports to the US powered ahead at break-neck speed of 33%; exports to India more than doubled; despite the slowdown in China our exports there grew by 8%; and taking full advantage of the weak euro exports to the UK stormed ahead by 15%.
The crowning of last year’s export activity, and one which shows just how competitive Ireland has become, is seen in the 29% growth in exports to the largest of the eurozone markets Germany, where no currency ‘booster’ was at work.
Brazil and Russia, both in the middle of deep recessions, will be the biggest contributors to the world’s slowdown; fortunately we have little export exposure to either of these markets.
Apart from Latin America, Europe as a whole will be the slowest growing region of the world, way below the US, other advanced economies, and most emerging markets.
And therein lies perhaps the biggest of the concerns for 2016.
Europe takes over half of our exports and for Irish exports to continue at a robust growth rate the EU must be kick started back to reasonable economic growth. More quantitative easing from ECB chief Mario Draghi looks essential.
Second of the concerns worrying exporters is the Chinese economy and whether it will have a soft landing or not.
The shockwaves to the global economy every time the yuan has a small devaluation, or the growth figures drop by a percentage point has to be curtailed if business confidence is to be retained.
This is not so much a question of potential lost Irish exports to China as it is the impact on many of our other markets.
The EU relies on China as the second largest customer for all its output.
The low price of the barrel of oil is now a concern. The slump in the oil price started as a competitive advantage to exporters.
It has now caused collateral damage in many of our emerging markets.
Volatility is the most likely feature in the year head, and the price is unlikely to return to $100 a barrel.
It is worth noting that oil is still well above the $20 a barrel prevalent throughout the 1970s.
An overarching cross cutting issue on Ireland’s export horizon is the question of global consumer trends and whether we are riding out the end game of a very lucky period or remain on the sweet spot for the future.
A look at global consumer expenditure and the trends expected in the coming year seems to indicate growing reliance on computer-related products and services — areas where Ireland’s exporters are well positioned.
Last year, Ireland’s software exports grew by 16% to €56bn.
Health policies and the ability of more and more emerging markets to pay for medicines is also a trend. Ireland is increasingly seen as the go to location for pharmaceutical producers, who recorded exports of €65bn last year.
Despite these healthy signs, many exporters will be hedging their bets and wondering whether the strong exports performance will continue this year, as the country faces the exceptional uncertainties plaguing international markets.
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