Record trade levels likely despite Ireland's export decline

Alan McQuaid, chief economist with Merrion Capital
Alan McQuaid, chief economist with Merrion Capital

Ireland is still expected to generate a record annual trade surplus — of around €50bn — this year, despite the latest figures, which show a double-digit percentage drop in monthly export value.

The latest data from the CSO shows the value of seasonally adjusted goods exports fell 12% — or €1.27bn — to €9.55bn in April, compared to the previous month.

A 9% increase — to almost €6.2bn — in the value of goods imports led to a 34% reduction in Ireland’s seasonally adjusted trade surplus, to €3.39bn, in April.

For 2016, as a whole, Ireland’s trade surplus has been revised downwards slightly — from €45.52bn to €45.43bn — but it still represents a record high, and was €3.13bn greater than the previous record surplus of €42.29bn. Furthermore, a fresh record is still on course to be hit this year. That is based on a generally good performance for the first four months of 2017, which showed a 10% year-on-year rise in export value to €41bn.

“The trade outlook, going forward, remains clouded in uncertainty, but we are still anticipating another solid performance this year. Indeed, based on the very positive start to 2017, with the trade balance in the first four months running €2.6bn above that of the same time last year, another record surplus now looks on the cards, of around €49bn-€50bn,” said Alan McQuaid, chief economist with Merrion Capital.

That said, Mr McQuaid is mindful of the hit Irish trade is likely to take as Brexit — over which formal negotiations between Britain and the EU are set to begin on Monday — becomes more of a reality.

“One can only speculate as to how Brexit will impact Ireland in the coming months and years, but there is clearly likely to be a negative impact on trade. The UK is the second-largest single country for Ireland’s goods and the largest for its services.

“At the same time, Ireland imports 30% of its goods from the UK. While the UK might only account for 16%-17% of Ireland’s total exports, 30% of all employment is in sectors which are heavily related to UK exports. SMEs — particularly those related to agri-food and tourism — will likely be more affected than larger companies by the introduction of tariffs and barriers to trade,” he said.

“Business and consumer confidence have been dented to some degree, though not in a major way, in recent months, by the uncertainty surrounding Brexit. Indeed, the trade data for last year were positive.

“Still, the uncertainty over the implications of Britain’s decision to leave the EU suggests risks on the external trade front remain elevated going forward, especially for food exporters. The movement in the euro/sterling exchange rate will be critical in this regard,” said Mr McQuaid.

New Enterprise Minister, Frances Fitzgerald, seized on the export rise for the first four months, calling it “very positive news” and indication of “a continued resilience in our export performance, despite the global uncertainty and exchange-rate volatility.”

She noted a 14%, year-on-year increase in exports to the UK, and a more than doubling in value of exports to China — to €2.1bn — as highlights of the first four months.

However, April’s showing marks the second successive double-digit monthly fall in exports, following a month-on-month decline of 14% posted in March.


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