Grounds for optimism in the economic outlook
Ireland’s economy is expected to gradually strengthen, with more solid and sustainable GDP growth over the medium-term. Merchandise exports are expected to grow by around 6% pa between 2016 and 2030, facilitated also by the on-going improvement in competitiveness.
Although recent developments have been disappointing, there are still some grounds for optimism in the economic outlook.
- While the share of infrastructure goods in total goods exports will remain low, the corresponding share in imports will increase as domestic investment recovers.
- The on-going improvement in competitiveness will lead to a sustained recovery in export growth over the medium-term.
- Trade conditions will remain subdued in the very short term.
Merchandise export growth is forecast to remain subdued this year, mainly reflecting weak Eurozone conditions, as Europe (excluding Russia) accounts for around 65% of total goods exports. But total merchandise exports and total merchandise imports are expected to grow from next year; indeed, there are promising signs already in trade with the USA and UK.
Equipping for growth
Why infrastructure is important
Infrastructure industries, as defined by intermediate goods for infrastructure and investment equipment required by businesses to boost production, are important as they contribute to an economy’s productive capacity.
Given the importance of chemicals and pharmaceuticals exports, the share of infrastructure goods in total merchandise exports is set to remain one of the lowest in Europe, at around 20% over the forecast horizon. Exports of infrastructure goods to the UK, Germany and the USA will still account for more than half of total infrastructure exports, but exports to China are expected to double over the forecast period. By 2030, the share of goods imports accounted for by infrastructure is forecast to grow to around 35% from 28% in 2013, as Irish firms increase their investment in equipment in order to boost production, taking advantage of their expected increase in competitiveness. Investment equipment is forecast to account for over 21% of total merchandise exports by 2030, up from 18% this year.