Exporters fear that business is set to slow rapidly in the second half of the year as high oil prices and rising interest rates begin to bite, writes Barry O'Halloran.

Figures released by the Irish Exporters' Association (IEA) yesterday show that sales to the rest of the world were strong in the first half of the year, rising 7 per cent to €70 billion from €65 billion during the same period in 2005.

But the IEA's half-yearly review says that the strong performance should be seen in the light of global economic growth of 8 per cent.

It warns many of its members believe that global economic growth has halted.

They're blaming factors like rising oil prices, inflation and interest rates, along with the collapse in World trade talks and the Middle East crisis.

"As a consequence, the IEA anticipates a much weaker export performance in the second half of 2006," it says.

"A forecast of second-half exports averaging 3 per cent growth is now anticipated for combined merchandise and service exports."

The figures show that merchandise - manufacturing - exports grew at one quarter of the rate of service sales during the first half of the year.

Merchandise exports accounted for €45.1 billion of the total, compared with €43.6 billion during the first half of 2005.

This represents growth of 3.4 per cent.

Services grew to €24.9 billion in the first half of 2006 from €21.8 billion during the same period last year, which is growth of 14.2 per cent.

Manufacturing also suffered from an 8 per cent increase in the value of the euro against the US dollar.

"The combined effect of unfavourable exchange rate movements, high energy prices and the continued rise in wage costs above our trading partners, is expected to impact on merchandise exports in the second half of 2006," the review says.

"The IEA is therefore forecasting a zero per cent growth for merchandise exports in the remainder of 2006."