Something Different on Joyfullantidotes: Irish Manufacturing Industry Reports Downturn

This blog usually offers more lighthearted posts but today I thought I would try something a bit different. Recently I have being trying my hand at more topical pieces and thought maybe you would enjoy them. Let me know what you think!


The already struggling Irish economy took another hit this month as it was announced that the manufacturing industry shrunk, despite having experienced growth in 2011 and 2012. Indeed the industry shrank at its fastest rate in nineteen months this April to 48.0, two below the 50 line dividing growth from contraction.[1]

The drop in activity, which accounts for a quarter of Ireland’s gross domestic products according to World Bank figures, has caused worries that the fall may affect the ability to obtain sustained recovery.Additional worries have arisen in the industry due to the costs of goods leaving Irish factories increasing by 0.9 percent in March, most apparent in the shipment of computers, electronics, optics and pharmaceutical products.

The flailing industry is unlikely to show any signs of vast improvement in the near future, not until the Euro zone crisis is at the very least stabilized, simply because Ireland’s economy depends too much on exporting goods and services.

This reliance is nothing new according to David Duffy, an economist at the Economic and Social Research Institute. “The ability to access export markets has been important because so much of our industrial policy, going back to the late 1950s, has focused on attracting foreign direct investment,” he says. “We’re a small open economy, so we have a small domestic market.”[2]

This leads us to the big question: can Ireland continue to meet the requirements of its bailout conditions if the manufacturing industry continues to act out of favor? Most probably. While government officials have lowered the economic outlook for the next two years, they are confident that the country has enough fiscal room to meet its bailout austerity targets.

Perhaps one of the largest contributing figures to this success will be the attractive corporation tax offered to potential investors. IBEC (Irish Business and Employers Confederation) states that a combination of this tax and the presentation of Ireland as a ‘sophisticated location for high value added services’ has in the past, and will continue to, attract and sustain the confidence of foreign direct investment.[3]

Currently, nine out of ten of the world’s top listed ICT companies as well as eight out of ten of the world’s top pharmaceutical companies have a strong operational presence in Ireland. The strength in this continuing attraction may just exactly be what the country needs to sustain itself while combating hardships in other sectors.

It is certain that Ireland will continue to rely on its manufacturing exports in the foreseeable future, understandable considering the strong reputation of Irish goods; for example, it is the largest exporter of beef in Europe and ranks fourth on the worldwide scale. But in times of widespread economic uncertainty, it is unwise to continue viewing manufacturing as a main source of profit. While the industry is expected to regain the strength it had during the Celtic Tiger era, it would currently be more beneficial for government officials to spread their efforts more broadly.



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