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Irish competitiveness, exports dip in Q4

Wednesday, March 13 11:50:49

For the first time in 14 quarters, Ireland witnessed a small drop in its measured competitiveness in the last three months of 2012, as well as a modest decline in exports of 0.1pc.

The exports slip was due to a contracting Euro area economy and a drop in UK output as well as the fall in the value of Sterling against the euro.

That's according to the latest Investec Bank Ireland Export Analysis Report (IIEAR) out today, which also shows that Ireland's competiveness has improved nearly 10pc since Q1 2008 and the scale of the decline in exports was limited by continued growth in China, Malaysia and Hong Kong and by modest growth in Switzerland the United States.

The 0.1pc quarterly decline brought an end to the IIEAR's 14 quarter run over which it had avoided slipping into negative territory. The continued weakness in trade with the Euro area and the UK remains a concern. The strength of the Euro against sterling in particular has not helped the export sector and highlights the need for exporters to engage a robust hedging policy. However, on the whole the Irish export sector looks well placed to take advantage of any uptick in the Euro area and to continue to benefit from the opportunities in faster growing markets.

Outside of Europe, Ireland's major export partners continued to grow, contributing positively to the IIEAR and helping to offset some of those losses from European trading partners. The contribution of the United States was positive but more modest over the final quarter of 2012. Growth in the States is expected to resume at a somewhat firmer rate in Q1 2013, helping to lift demand in a market which accounts for around one-fifth of Irish exports. With the BRICS (Brazil/Russia/India/China/South Africa) countries accounting for circa 25pc of global GDP in terms of purchasing power parity, we see ample scope for Irish exports to these markets to grow significantly over the coming year.

Speaking at the launch of the report this morning, Aisling Dodgson, Head of Treasury, Investec Ireland, said that while the decline of 0.1pc is unwelcome, it comes as no surprise given that it mirrors both CSO trade data for the period and the export sub-index of the Manufacturing PMI report compiled by our colleagues in NCB, an Investec Group company, which showed a moderation in the rate of expansion during Q4 2012.

"The Q4 decline was a symptom of a further, deeper, quarter of weakness in Ireland's major Euro area export partners, with core Euro area countries joining the rest of the Euro area in contracting over Q4; in particular, Germany and France together dragged the IIEAR down by 0.07 percentage points, with Italy, Spain, the Netherlands and Belgium all weighing on the index too. Outside of the Euro area, the 0.3pc contraction in UK fourth quarter GDP also weighed."

"However, the improvement in Ireland's competitiveness since the start of the financial crisis remains one of the success stories of the Euro area crisis, improving by nearly 10pc since Q1 2008. Ireland's efforts over recent years should leave it well placed to make further gains in export markets when the global recovery momentum builds. In addition, the positive contribution to the IIEAR from our non-Euro trading partners is also to be welcomed. Further gains in trade with China and the greater Asian region also highlight the opportunities that exist for exporters in these markets and are a cause for some optimism for 2013."