Irish Balance of Trade & Payments

Balance Of Payments

 Ireland is one of the most open economies in the world and is one of the leading countries in the world at attracting foreign direct investment. The current account is a measure of the national income less expenditure (what money flows in and out of the country). Irelands current account performance improved significantly from 2007 - 2010 the deficit narrowed to levels not seen since the start of Irelands building boom. The sharp correction in the current account balance would suggest that Ireland is reducing its consumption and increasing its exports the account was last in balance in 2003. It shows multinational profits flowing out of the country and aid to foreign countries along with money from the EU. In the latest press release For the 4^th Quarter of 2010 Ireland had a surplus in the current account of 1,396m euro giving a deficit of just 1,113m euro for the year as a whole this was 3.7bn than the previous year and the lowest annual deficit since 2004. Direct investment income outflows decreased by 3.5 B whilst inflows were up 1.2 B on the previous quarter. Tourism and travel were down 400m on Q4 2009. For 2010 the merchandise surplus was 37,147m euro, 4.8bn higher than in 2009 due to an increase in exports of 6.8bn euro which was partially offset by an increase of 2 billion in imports. The services deficit was 100m higher than the previous year at 8,520m euro.

Merchandice - Shows an surplus of  tanigable exports.Services- include  Software, Toursism , Business services all intanigable.Income - shows Payements flowing in & out for individuals but mostly multinationals  almost a mirror image of the merchandice surplus.Current Transfer - accounts for EU subsidies now flowing out and Third world aid.

When we have a closer look at the trade balance we can clearly see the collapse of the Irish economy and the dramatic reduction in imports. What is quite clear that there was no major recovery exports by 2009 the surplus was created by the collapse in imports. We can see also see the end of Irelands export led growth in 2001 and the rise and fall of the domestic boom between 2002 & 2007.One thing that we should pay particular attention to and is often over looked in the strength of the euro against our main trading partners. In 2006 the euro strengthened against the dollar and in 2007 against sterling.

The Balance Of Trade

The balance of trade shows the import and export of tanagible goods it does not show intanigable goods such as software and Finiancial services. Irelands balance of trade is slightly distorted due to Ireland being such an open economy. Many of the goods imported into Ireland go through some form of processing and are exported out again. It may also be distorted by multinationals buying material from the parent company at favourial prices. The value of exports was up by 6% in 2010 on the previous year whilst the value of imports was relative unchanged. In 2010 (60 %) of our export market was made up of US 23% (up 14% on previous year) Belgium 14% UK 14 % and Germany 8 %( up 21 % on previous year).

The only import catorgies that are  higher than their 2006 position are Chemicals  and petroleum products and we should keep in mind that the petroleum products could be effected by price increases and the dollar exchange rate.

The major growth areas in exports are coming from Chemicals and the medical /pharmaceutical sector.