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03 November 2015

Export Review: Q3 2015

Posted By: AIB Business

Competitive exchange rates and sharply lower oil prices have pushed exports to new highs, writes John Whelan, Export Sector Specialist at AIB.

Finally, a competitive euro for exporters to trade with. When the euro floated on 1st January 2001, its effective rate was $1.17 US dollars and £0.71 Sterling. The exchange rate quickly became volatile and, for most of the time since then, has traded above its floatation rate. This has been disappointing for Irish exporters, who faced competitive pricing difficulties in the UK, USA and across much of the rest of the world, where the euro was not accepted.

However, over the past few months the euro exchange rate return to the 2001 launch rate, averaging $1.1 and £0.71 across the July / August / September period. And any thoughts of a return to higher euro value, which emerged briefly during October, were squashed by the European Central Bank (ECB) on 22nd October when the ECB president Mario Draghi said they were ready to further increase stimulus measures (QE2)  before the end of the year to underpin euro area growth.

There was even discussion over cutting interest rates further – which also acted as a trigger to a lower euro, with rates on 23rd October returning to $1.10 and £0.71.

This exchange rate boost to the sales price marketing for Irish exporters in the third quarter was supplemented by the cost base erosion from the falling price of oil, which fell to $48.5 brent crude per barrel in September 2015 compared to $99.1 per barrel in September 2014. This brought down transport, packaging and heating costs.

The combined accelerators helped push exports up by 18.3% to a new high of €166 billion for the nine months to end of September, with goods exports growing at the faster rate. The latest release from Eurostat shows that Ireland’s goods exports grew at three times the EU average in the January to August period.

€ Million





Diff €

















Source: JFW Export Analyst and CSO


Main Markets Continue to Perform Strongly

The exceptional expansion in Ireland’s goods exports, despite the political tensions in the Middle East, economic sanctions with Russia, and Chinese and other emerging market decelerations, has been driven by continued economic recovery in our main markets of the US, the UK and the Eurozone, which combined account for three quarters of our output.

Goods exports to the US – Ireland’s largest market – grew by over 22% in the nine months to September. The high growth was driven by a euro depreciation of 7% against the dollar and buoyant US economic growth of 3.7% in Q2, which is expected to have continued into Q3.

Exports to the UK increased by 10%, assisted by a weaker euro, which fell by 5% against Sterling since the beginning of 2015. But there are concerns for the future prospects for smaller Irish exporters who primarily export only to this market, as economic growth in the UK cooled to 0.5%, with manufacturing contracted for a third quarter and UK exports to the Eurozone barely increasing by 1%, a sign that Britain may be falling prey to EU exit headwinds. Compared with a year earlier, UK GDP expanded 2.3% in the third quarter.

Exports to the Eurozone jumped by 28%, as moderate economic growth of 1.5% continued across the zone, sustained by the quantitative easing (QE) process of the European Central Bank and the resultant competitive support from a depreciated euro. The exceptional export growth mainly reflects a bounce back from the depressed economic conditions over the past five years when Ireland’s exports to the Eurozone contracted. However, it is unlikely that Irish exports to the 19 Eurozone countries will continue at this exceptional pace, unless there is a major improvement in economic growth across the region.


Exports in €Millions














Rest of EU




Total EU












Rest of World




Total Goods Exports




Source: JFW Export Analyst and CSO


BRICS Slow Down But Opportunities Abound Elsewhere

The contraction in Ireland’s exports to the so called BRICS economies of Brazil, Russia, India, China and South Africa was to be expected as political and economic issues impacted heavily on trading conditions. However, the lost exports were more than made up for by exceptional expansion in exports to Japan, Singapore, South Korea, Australia and Saudi Arabia / rest of the world.

The export figures give a strong indication that Ireland has regained much of its competitiveness and, as a consequence, is clearly gaining market share over other EU competitors in most world markets.

However, deeper analysis of the export figures for the period show that certain sectors of our export industry are in the “fast lane” of global demand and these have contributed most to the export growth, enabling Ireland’s exporters to out-perform against competitors. For example, our largest export sector – Pharmaceuticals, with exports of €47 billion – grew by 23% in the nine months. This sector was affected for several years by loss of patent protection and a global merger and acquisition frenzy, but Ireland has come out on top as a premium location for the new wave of biologic pharma products dominating the sector. Our second largest sector – Computer software, with exports of €39 billion – grew by 15%, with long established computer hardware companies selecting Ireland as the place to locate their software / big data/ cloud computing activities. The third largest sector – Business services – is tapped into the rampant demand globally for social media services from companies such as LinkedIn, Facebook, and Google. Aircraft leasing is also in the business services export sector and again there has been rapid growth in aircraft leasing, with 40% of all new aircraft sold in the year arising from lease companies that are heavily populated in Ireland. The Business services sector recorded exports of €16 billion in the nine months to September, an increase of 14% on the previous year. All these high growth sectors have found Ireland’s supply of talented staff and effective business environment compelling.


Falling Food Prices Affecting Agri

Of concern is that the more traditional home-grown industries have not fared well this year, such as the agri-food sector where exports grew by only 3% in the nine months, primarily as a result of falling food prices internationally. Falling food prices in our key export markets across the UK and Europe over the last year have been driven by significant declines in international food commodity prices, falling oil prices and continuing intense price competition between supermarkets. For example, DEFRA (the UK Government’s agri-food body), in its latest official release, shows milk retail prices down 25% over the 12 months to August 2015. Short-term pain seems certain for the agri-food sector while the market readjusts to the new economic environment.


Conflicts and Volatility Play a Factor

On the broader front, many exporters will be very concerned by the intensifying conflicts in the Middle East and between Russia and its eastern European neighbours, as well as the volatility in global financial markets particularly associated with China.

The prospective easing of sanctions on Iran is likely to counter some of the concerns, but future currency shocks, a return to high oil prices and – as expected by the World Trade Organisation – weaker economic growth globally, will undoubtedly feature in any forecasts for the future and the likely impact on exports over the next year.


Written by: John Whelan, Export Sector Specialist at AIB 



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