The latest trade figures from the Central Statistics Office suggest the Government's growth forecasts for the economy are indeed "overly optimistic", just as the European Commission has warned.
At face value, the numbers indicate Ireland’s export sector is not benefitting from the recovery in the euro area and in the UK, with exports falling by 1.8 per cent during the first four months of the year.
However, on closer inspection, the contraction appears to be entirely down to the continuing slide in pharma exports, linked to the so-called patent cliff. During the period, pharma exports fell by 5.8 per cent, while non-pharma exports expanded by 1.8 per cent.
All of which makes the Department for Finance’s forecast for export growth of 2 per cent this year look optimistic, even at this stage. Bearing in mind the pharma sector accounts for about 10 per cent of country’s GDP, its continuing underperformance is likely to act as a drag on that number as well.
Last year, GDP contracted by 0.3 per cent on the back of a 17 per cent fall in repatriated multinational profits, out-stripping even the most pessimistic predictions.
GDP numbers for the first quarter of 2014 will be released in about two weeks.
Another bad out-turn could place extra pressure on Minister for Finance Michael Noonan as he tries to square the demands of an austerity-weary public and the country's creditors in the upcoming budget.
He is already on record as saying next year’s 3 per cent deficit target can be achieved with an adjustment of less than €2 billion.
He’ll be relying on positive growth numbers when submitting his budgetary proposals to Brussels later this year.
"Since the beginning of the pharmaceutical patent cliff, we have argued that any reduction in revenues was likely to have little impact on the domestic economic recovery, although artificially depressing measured GDP growth," Conall Mac Coille of Davy Stockbrokers said. Although employment in pharmaceutical companies dropped by 5.3 per cent in final quarter of last year, this 2,300 decline pales in comparison with the 60,000 aggregate jobs created in the year, he added.
