Monday, July 15, 2013

15/7/2013: Irish Travel & Tourism Sector Impact on External Balance

Some interesting figures on Tourism and Travel contributions to the Current Account in Ireland over 1998-2012 period show that, at least year-and-a-half into State subsidisation of the sector under the current Government, there was little change on the sector exporting activity to show for the subsidies.

The numbers below clearly highlight the low impact of the core indigenous sector and subsidies allocated to it on the external balance in the Irish economy. Please keep in mind - I am only considering impact of the sector on external balance here, not on other economic performance parameters.

Let's crunch through some numbers:

  • In 2012, Tourism & Travel (T&T) sector contributed EUR3,022 million to the credit side of the Current Account in Ireland - an improvement of just EUR12 million over 2011 and still EUR84 million below 2010 level. Excluding the absolute low (so far) of 2011, 2012 was the lowest reading since 2000 (remember - these are nominal figures). In real terms, this was lower than 2011 reading and the lowest year on record (since 1998).
  • Because debit side of the sector (imports of T&T services and inputs) dropped over 2011-2012 from EUR4,817 million to EUR4,609 million, overall negative balance in the sector has shrunk from EUR1,807 million in 2011 to EUR1,587 million in 2012.
  • But don't credit Government subsidies for the above. Increases on credit side were most likely driven by the net outward emigration and return visits by new emigrants. That is, given how low overall increase on the credit side was.
  • Incidentally, the last time Irish T&T sector yielded a surplus on the balance side of the Current Account was back in 2000 and even then the surplus was puny at EUR100 million. Now, et's recall - in 2012, surplus on Transport sector side was EUR2,934 million, on Insurance side EUR2,650 million, on Financial Services side EUR2,465 million, on ICT services side EUR35,332 million and there were deficits of EUR28,867 on Royalties and Licenses side and EUR462 million on Communications side. All of which makes T&T sector, sort of not exactly a massively significant contributor to the current account. Which is not to say anything about it's contributions to other parts of the economy, of course.
  • But in terms of credit side of the Current Account alone (the target of Irish Government's subsidies/supports in T&T sector case), we have: T&T contribution in 2012 at EUR3,022 million, against EUR4,609 million contribution by Transport sector, EUR8,910 million contribution by Insurance sector, EUR7,073 million contribution by Financial Services sector, EUR35,681 million contribution for ICT services, and EUR3,888 million contribution from the Royalties and Licenses line of credit. Only Communications sector - with credit contribution of EUR627 million was below the Tourism and Travel when it comes to gross credit to the Current Account.
Two charts:

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