Exporters face a tough year as Budget pleas ignored
The value and volume of Irish exports are falling and Brian Lenihan has done nothing to help, says Jerome Reilly
"OUR economy," declared Minister for Finance Brian Lenihan in his recent emergency budget speech, "must return to being driven by sustainable export-led growth, rather than domestic demand."
It was the clarion call that every Irish exporter had been waiting for.
They listened to the rest of Mr Lenihan's Dail statement fully expecting he would follow that declaration of intent to get Ireland selling to the world with concrete measures that would turn the aspiration of "export-led growth" into reality. They even hoped there might be a stimulus package.
They waited in vain. The budget did nothing that would boost the value or volume of Irish exports decimated by the economic downturn.
Exporters are suffering. Last year was catastrophic for Irish exports because of the slowdown in the global economy, the banking crisis, adverse exchange rate movements -- especially with the UK -- and the pork and bacon crisis. It meant that value of Irish goods and services sold to other countries fell by €6bn last year to €148.2bn.
And according to the Irish Exporters Association (IEA) that is set to fall by another €7.5bn this year.
John Whelan of the IEA told the Sunday Independent that not one of exporters' pre-budget demands were met.
"There was nothing in it for us. We were astonished that the most important budget in the history of the State did nothing to help sell Irish products abroad," he said.
Ireland's global market falls into two main categories. Things we make and services we sell. Merchandise, the stuff we actually make or produce, including food products, went down five per cent to a little over €84bn from €88.5bn in 2008 while services fell two per cent to €64.2bn from €65.6bn.
So what does Ireland actually make?
In order of their value to the economy our principal exports are: chemicals and pharmaceuticals (€43.4bn); machinery, including computers (€17.8bn); various manufactured goods, including medical devices (€10bn); agri-food (€6.8bn); beverages (€1.1bn) and crude materials (€1.3bn). We also produce fuel and lubricants, animal and vegetable oils and various miscellaneous products.
Why merchandise fell more than services is easily explained. Consumer confidence disintegrated worldwide. Across the world people became afraid to spend. Higher operating costs in an economy with high wage and energy costs as well as a massive increase in the cost of raw materials all combined to decimate sales and profits on Irish-produced goods.
On the services side, it was the astonishing turbulence in the financial markets which contributed most to the fall. The services this country sells abroad includes -- again in order of importance -- computer services, insurance, financial services, tourism and travel, transport and telecommunications.
Against the backdrop of declining sales and the particular difficulties we face in our key markets, the minister's call for "sustainable export-led growth" appears to be almost impossible to achieve in the short-to-medium term.
The agri-food sector is heavily dependent on the UK. The rapid depreciation in sterling which fell by 33 per cent in 2008 against the euro, as well as the devastating impact of the dioxin contamination of Irish pork, led to a seven per cent decline in the value of agri-food exports.
Beverages also got walloped by a slowdown in demand and the depreciation of sterling and the dollar.
If there is one bright spot it is the performance of chemicals and pharmaceuticals -- which actually grew by two per cent last year, despite the contraction in global economies. Exports of products like Viagra and other pharmaceuticals and chemicals now account for 52 per cent of Ireland's total exports.
John Whelan of the IEA says the performance of the chemicals and pharmaceuticals sector should not be allowed to mask the grave dangers faced by Irish exporters or the inaction of government.
"Basically, Mr Lenihan has become absorbed, as have his officials in the Department of Finance, in trying to sort out the banking issue. He has also been tackling the public expenditure situation and the pensions issue.
"We have told him that to avoid a prolonged and damaging recession and to stop a large number of Irish exporters going to the wall, he will have to put a stimulus into the economy. He's failed to do that.
"The answer we have gotten so far," says John Whelan, "is that there is no money in the coffers to assist with an economic stimulus.
"Stimulus packages, which have been introduced by virtually all the developing countries, are in the region of 3.5 to 4.5 per cent of GDP -- which in the case of Ireland would mean a stimulus package of €6bn.
"We know they have the problem of finding the money to come up with a stimulus package -- but if they are going to prevent a very substantial market loss, and stop exporters pulling out of markets that they will not be able to re-enter, then they must find that money. The recent budget did nothing to help. It was desperately disappointing," Mr Whelan concluded.
