Food Wise 2025

International Context

Chapter 2 - International Context

Macroeconomic Environment

Post the 2008 financial crisis the global economy continues to recover albeit in an uneven and unspectacular manner with significantly different rates of recovery and stabilisation in different regions. There are clear divergences in economic growth recovery between more advanced economies and emerging economies. While the US economy continues to strengthen with unemployment rates dropping back to pre 2008 figures the transition to a post quantantive easing (QE) environment in the US and indeed UK will result in continued uncertainty in these markets for the foreseeable future.  In addition, the recovery in the Eurozone countries remains fragile with unemployment rates remaining high in many EU Member States, the medium term threat of high structural unemployment levels and economic growth levels challenged by continued uncertainty around banking and fiscal policy.

Growth prospects for OECD countries in the period up to 2015 are expected to be maintained at the current level of an average 2.2% per annum. In the non-OECD area, medium term prospects for emerging economies have been revised slightly downward with China and India expected to grow on average 7% and 6.4% per annum, respectively, over the next ten years.  Although impressive compared to developed economies, these rates are below the growth rates experienced during the previous ten years.

Exchange Rate Fluctuation

Recent exchange rate fluctuations underline the ongoing economic volatility in global markets in particular in Eurozone countries and represents an ongoing challenge for the Irish agri-food sector given the large export component to the value of the sector.  While in the short term recent drops in the value of the euro are positive for Irish exports to UK and third countries it is clear that over the medium to longer term the Euro is likely to recover therefore reducing competitiveness of Irish exports on UK and non-EU markets and this volatility is likely to remain a constant external factor for the sector.   The sector must therefore maintain and improve its overall international competitiveness to minimise the risks associated with currency fluctuations.

Energy Price Volatility

Volatility in global energy prices is also likely to remain a consistent feature in the global economy over the coming years. It is clear that recent very low oil price levels are not sustainable and future energy price volatility will remain a constant challenge over the next ten years and beyond. This must be taken into account in the context of the international competitiveness of the sector on export markets.