Growing exports

A growing global economy, particularly in Ireland’s main markets, saw an increase in the value of goods and services sold abroad in 2010. Owen McQuade looks at this bright spot on an otherwise gloomy economic outlook.

The value of goods sold abroad in 2010 was €161 billion. The Irish Exporters Association forecasts a 7 per cent growth in exports for 2011 to €172.6 billion as economies in the Republic’s main markets grow. The strong performance in exports made a positive contribution to state revenues and higher than expected tax revenues from exporting companies enabled the tax revenue target for 2010 to be exceeded.

The exports were not just manufactured goods but tradable services. Despite the reputational damage from the banking crisis and the subsequent bail-out, the International Financial Services Centre contributed a significant portion of the country’s exports last year. Assets under management at the IFSC reached €2.48 trillion last year which was an increase of 8 per cent on the previous year.

With the growth i n Ireland’s exports, current account is expected to move into surplus this year for the first time since 1999 and is expected to rise to just under 3 per cent of GDP by 2014. This is in contrast to the large deficit that had opened up in the second half of the last decade as ever-rising imports, fuelled by spiralling consumer demand, outstripped exports.

In the fourth quarter of last year exports grew by an impressive 18 per cent. Growth in the manufacturing and agri-food sectors was the key drivers of the export expansion in this quarter, increasing 27 per cent on the same period in the previous year. The multi-national sector is performing well and the projections for 2011 see the positive trend continuing. In 2010, 126 multi-national companies invested in Ireland creating nearly 11,000 jobs. This made last year the strongest for foreign direct investment in four years and highlights the importance of the favourable corporate tax rate.

2011 outlook

Although world trade growth is expected to slow somewhat from the 12.3 per cent in 2010, to 8.3 per cent this year, currency exchange rates are expected to be favourable for Irish exporters.

The corporate sector is also expected to further recover in 2011 with good profitability, which should help increase inward investment into Ireland, with a knock-on effect on exports. In 2011 exports of goods are expected to grow by 5 per cent and services by 10 per cent, giving an overall increase for 7.2 per cent to reach the new export high of €172.6 billion.