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Export Review: Q3 2014
Robust export growth of 4.9% in the third quarter (Q3) of 2014 pushed Irish GDP growth to the top of the European ladder, writes John Whelan, Export Sector Specialist at AIB.
The European Commission is now forecasting a 4.6% GDP growth for Ireland in 2014. Services exporters played a particularly buoyant part in the Q3 exports, which raced ahead by 8.8% compared to the same period last year, driven by a 23% growth in computer software services. Despite recording the highest annual rise in industrial production across the Eurozone in September (according to Eurostat), manufactured goods exporters were still held back by the economic malaise across the Eurozone, and only managed a growth of just under 1% compared to the same quarter last year.
Cumulative export growth for the nine months to September, as shown in the chart below, was just under the 5% level and, while good by comparison to many of our European partners, is unlikely to reach the recent full year forecast by the Department of Finance of 8.3% export growth or the Irish Central Bank forecast of 7.2%, with consequences for economic growth and Budget estimates.
|€ Million||2013||2014||Diff €||% Change|
Remarkably, exports to Russia more than doubled in July and August, as exporters rushed to meet their customers’ demands before the embargo blocked the borders at the end of August. Year to end of September exports to Russia were up 23% as a consequence. However, the Russian stance on Ukraine is continuing to hold back global trade and more robust return to growth in key markets such as Germany.
Exporters to China continued their steady growth at 6.8% for the nine months, with very strong growth from both the pharmaceuticals and the agri food sectors. China is now the second largest market for Irish dairy products, third largest pork market and, overall, the sixth largest market for Irish agrifood exports.
Africa continued to show good growth prospects, particularly South Africa, where exports grew by 18% in the nine months to September.
Mexico is Ireland’s largest trading partner in Latin America. In the nine months to September 2014, Irish exporters shipped €913 million worth of goods to Mexico, a massive 68% growth on last year.
Nearer to home, exports to the UK market fell by just under 4% as the figures continue to be affected by falling exports of pharmaceuticals. However, the indigenous exporters, assisted by a favourable exchange rate this year, have shown steady growth in sales to the UK with agri food exports up 4% to the end of September.
Germany and France, the euro area’s two largest economies, returned to growth in the third quarter, with expansions of 0.1 percent and 0.3 percent respectively. Italy remained a weak spot, shrinking for a second quarter. These three markets provide the bulk of the demand for exports from Ireland, and will need to show much stronger economic growth if demand is to rise. Some support to growth may come from the euro exchange rate, which has fallen by 8% against the US dollar and by 4% against Sterling since May. But it is looking increasingly likely that the ECB will have to unleash a fresh stimulus with more aggressive sovereign quantitative easing, as well as maintain its negative deposit rate, to boost growth and prevent deflation. As it stands, Ireland’s exports to the Eurozone have fallen by 4% in the first nine months of the year, and don’t look like they will recover by the year-end.
The US remains our single largest market, where economic growth of 0.9% was recorded in September and is now expected to comfortably reach the 2.4% GDP growth target for this year. US demand for Irish exports grew by 4% in the nine months to September to reach €14.8 in goods exports and an estimated €6.6 billion in services exports.
Key Sectors Driving Ireland’s Exports
In the nine months to September 2014, the key sectors driving Ireland’s goods export industry were:
- Agri-food exports, which grew by 8.1% to €6.9billion
- Medical devices exports, which grew by 12% to €3.8 billion
- Miscellaneous manufactured / engineering exports, which grew by 3.5% to €4.8 billion
- Computer hardware and peripherals, which grew by 0.5% to €3.8 billion
- Pharmaceuticals and chemicals exports, which grew by 0.5% to €38.8 billion.
The key Services export sectors driving the growth were:
- Computer services, with export growth of 13.1% to €31.8 billion
- Business services, with growth of 12.4% to €17.7 billion
- Insurance export services, with growth of 5% to €7.0 billion
- Financial services, which grew by 1.1% to €6.2 billion.
Total exports of goods and services came to €139.2 billion in the nine months to September 2014 and are now forecast to reach €188.8 billion by the end of the year. This well exceeds the pre economic global crises levels of exports and will be the highest export level on record.
If you require finance to expand into new markets, talk to AIB today.
AIB’s Outlook: Exports report – in association with Bord Bia and the Irish Exporters Association (IEA) – provides detailed research, analysis and commentary, on a multi-sectoral basis, of the SMEs that are currently exporting goods or services from Ireland. An important part of this report is the specially commissioned detailed research on exporting SMEs, which has been carried out independently by Ipsos MRBI on behalf of AIB.
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