The Irish Exporters Association's Half Term Review 2005 says that all the indicators point to global trade in the first half of the year slowing from the exceptional growth in 2004 of 5.1%.
The Review shows that Irish merchanise exports were fairly flat in the first six months of the year, compared to the same time last year, with just a 0.6% increase.
The Irish Exporters Association says that the competitive advantage of the fall in the value of the euro by 11% against the dollar and by 4% against sterling since the start of the year has not yet worked its way into the trade figures, due to advance currency hedging.
The IEA says that another factor in the lack of merchandise export growth has been the extra cost burden of very high oil prices working through the supply chain costs. Waste management costs and other business costs are also increasing.
As there is no sign of an easing in cost bases, the IEA says that Irish exporters will continue to find it difficult even with the falling euro. The IEA is forecasting growth of 5% in the second half of the year.
For the full year, the IEA says it sees €129.8 billion worth of total exports, up 6.5% on 2004. Service exports will account for 34% of the total and continuing to increase at a rapid pace of 15% over 2004.
Merchandise exports will continue to grow, but at the very modest pace of 2.7% over the previous year.
The Half Term Review shows that the two most important markets for Irish exporters - the US and the UK - proved sluggish in the first half of the year. Merchandise exports to the UK fell by 0.6% and to the US by 0.7%.
However, the prospects for a recovery in exports to the US in the second half of the year are strong.
For the euro area, despite the weak domestic indicators, exports grew in the first six months of the year to a number of the larger markets, with exports to Spain up by 13%, to France by 11% and to the Netherlands by 9%.
Ireland's largest export market in Asia is Japan, and the IEA says that after a long time of retrenchment, now shows signs of a recovery with exports up by 17% in H1 2005 compared to the same time last year. China is also providing good growth prospects for Irish exporters with exports for the first half of the year growing by 47% into China.
The IEA says that the ICT sector continued its dramatic fall in the first half of the year, with exports of computer and telecom equipment down by €2.3 billion over the same time last year, a fall of almost 20%. However, the services side of the ICT sector is growing rapidly with major investments by Google, E-Bay, Amazon and several others.
The 'phenomenal' growth in the chemical and pharmaceutical sector appears to be slowing to a more sustainable growth level, with exports up over 5% in the first half of the year.
The Review shows that the food and drinks sector continues to hold market share, despite the many competitive issues for exporters in the sector. Indigenous Irish exporters tend to be most populous in this sector and accout for about 50% of total indigenous exports.
The Review concludes that there is clear evidence that Irish exporters are adjusting to the new realities of the 21st century and are moving their international marketing to a service enhanced product offering.
'10 years ago, service exports only accounted for 10% of total exports, last year they accounted for 31% and in 2005 they are forecast to reach €43.5 billion or 34% of total exports,' commented John Whelan, CEO of the Irish Exporters Association.
