Trade deficit deteriorates in Q1
Weak performance from services sector and multinational profit repatriation keep Ireland in the red
Published 01/07/2010 | 05:00
A weaker performance from the services sector saw the country's deficit in its dealings with the rest of the world widen in the first three months of the year.
Figures from the Central Statistics Office (CSO) yesterday showed the balance of payments current account deficit at just over €1.6bn. This compared with near balance in the previous six months, but was more than €1bn lower than the deficit in the same quarter of last year.
Lower imports boosted the surplus on physical trade to a record quarterly figure of almost €9.4bn. The total trade surplus last year, at €32.4bn, was exceeded only in 2003.
But the trade surplus disappeared again in the outflow of multinational profits abroad. This was put at €10.5bn in the first quarter and at €34.7bn last year.
Profit inflows from Irish investments abroad remained steady at €2.5bn in the quarter. Direct investment abroad showed acquisitions of €5bn, while inward investment came to €4.3bn, the CSO said.
The important services sector showed exports of €16.6bn, down slightly on the same period last year. Unlike physical goods, Ireland imports more services than it sell abroad and the deficit stood at €2bn.
Irish travellers spent €1.2bn abroad in the quarter, which was almost €800m less than foreigners spent here.
The biggest deficit was in the payment of royalties and licences by the subsidiaries of foreign services companies operating here, which came to €6.7bn in the quarter and €25bn for the whole of last year.
"It was a slightly disappointing quarter for services exports," said Rossa White, chief economist at Davy Research.
The figures show that Irish residents reduced their holdings of equities by €6bn during the quarter, continuing a trend that began at the beginning of last year.
But outside investment in Irish equities totalled more than €14bn.
Figures from the OECD on international mergers and acquisitions, showed 2010 is on track to match 2009 levels, having reached $300bn (€250bn) in the first half of of the year.
"This would bring to an end the sharp decline in international investment activity of 64pc from the peak of $1.7 trillion reached in 2007 and could signal that the bottom of the cycle has been reached," the report said.
"While this decline is significant, the bursting of the dot.com bubble resulted in a 72pc decline in international M&A between 2001 and 2003, suggesting that international investment has been more resilient during the current economic crisis."