Monday, January 17, 2011

The Benefits of Exports

There has been a lot made recently that “export-led growth” is the path out of our current economic morass.  There is no doubt that Irish exports are large and increased up until 2008 and have rebounded again in 2010.  But what have we gained from this increase in exports? The answer: not a lot.

Here is a graph using Forfás data released last November.  The dataset covers about 85% of Irish exports.

Exports and Direct Expenditure

Since 2000 exports from risen by over 50% yet the direct expenditure from the companies that generate these exports has FALLEN, albeit by just over 1% (and this is nominal data).  Exports have risen (and have contributed positively to GDP) but the impact ‘on the ground’ has been less than stellar. 

Direct expenditure as defined by Forfás is made up of two elements

  • Payroll costs
  • Goods and services purchased from Irish sources

The Forfás data show that employment in the sectors that have generated this 50% increase in exports over the ten year period in the graph above has fallen from 310,000 to 250,000. We might have a closer look at this dataset in subsequent posts but the above is a useful starting point when examining the merits of an “export-led growth” strategy.  A breakdown by indigenously- and foreign-owned firms will form the basis for a subsequent post.

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