Exports to grow 7% in 2011

Irish exports will continue to grow in 2011, expanding by 7 per cent this year, a new report has claimed.

The quarterly report from National Irish Bank on foreign direct investment said new export orders for goods were strong, while services, which are a large portion of Ireland outward trade, should continue to lead growth.

During 2010, total exports exceeded gross domestic product for the first time, with goods exports up 7 per cent and services rising by 10 per cent.

This growth helped contribute to a current account surplus in the first half of 2010, while the economy is expected to post a full-year current account surplus of around 1.5 per cent of GDP this year.

NIB's report predicted this will grow in the medium term, an assumption that was based on domestic demand remaining constrained and strong export performance.

Net employment in foreign multinationals is expected to grow by 3,000 in 2011 and 2012 due to the growth in exports.

"While this increase in employment is welcome, the export sector is not sufficiently labour-intensive to, in itself, make a dent in unemployment. However increased exports can result in higher household incomes and tax revenues, which in time will improve confidence and domestic demand," chief economist Dr Ronnie O'Toole said.

The report noted a decline in non-wage costs since 2008, while consumer prices have fallen to a level last seen in May 2000.

A separate report on competitiveness from Goodbody Stockbrokers described the fall in costs as happening at an "impressive pace".

It found unit labour costs have fallen by 9 per cent compared tot he rest of the euro zone between 2009 and 2010, with a further 4 per cent decline expected by 2012.

"Ireland has been steadily reversing the fall in competitiveness the country experienced during the boom years. We have worked hard at pricing ourselves back in to sectors which had all but closed their doors to Ireland because of continuous rising costs," said Goodbody's chief economist Dermot O'Leary.

"Already we're seeing evidence of a potential cluster effect in the IT services sector, similar to that which occurred in the pharma sector in the 1990s, with companies such as Google, Ebay, Yahoo, Facebook and LinkedIn all choosing to locate in Ireland."

Goodbody said the number of foreign direct investment projects in 2010 rose by 18 per cent. More than 20 separate projects have been announced by IDA Ireland so far this year.

"The low and transparent corporation tax rate is a cornerstone of Irish industrial policy and the recent pressure on Ireland from some quarters to increase it has not been helpful," Mr O'Leary said.

"Companies need certainty on these issues, and any uncertainty about Ireland's corporation tax rate must be concluded soon."

National Irish Bank's report said the possibility that Northern Ireland may review and lower its corporation tax rate in the future would be a "remarkable historic opportunity", although it was still some way off.

Although it could result in Northern Ireland coming into direct competition with the Republic for foreign direct investment projects with the Republic, Dr O'Toole said the economy could still benefit through increased imports.