Now that the first case of foot-and-mouth disease has been confirmed in Co. Louth, prospects for growth and employment in a wide range of sectors have been dealt a severe blow. With the disease raging out of control in the UK, and spreading to the Netherlands and France, we must accept at this stage that restrictions could stay in place for up to 6 months.
What does it mean for the Irish Economy?
Now that the first case of foot-and-mouth disease has been confirmed in Co. Louth, prospects for growth and employment in a wide range of sectors have been dealt a severe blow. With the disease raging out of control in the UK, and spreading to the Netherlands and France, we must accept at this stage that restrictions could stay in place for up to 6 months.
Agri-food
Agriculture accounts for 5% of Irish GDP, rising to 10% if one includes food processing. Obviously, not all of this is meat and dairy production - so perhaps 6% of GDP is at risk from the current crisis. In terms of exports, live animals, meat and meat products, and dairy products came to Ł2.4 billion and made up 6.1% of total exports in the first 11 months of 2000 - and an estimated Ł2.6 billion in the full year. The EU export ban extends only to Irish livestock and to all meat, meat products and unpasteurised milk from Co. Louth. However, several other countries have banned Irish meat exports on a unilateral basis and realistically consumers in these countries are not going to be willing to buy our meat as long as the crisis continues (even through there is no risk to human health). Note that 90% of meat produced in this country is for export purposes. According to the Irish Farmers' Association, meat exports worth Ł735 million would be lost as a result of foot-and-mouth over six months. There will also be costs associated with rebuilding herds further out, as well as depreciation in the value of livestock as they age. The impact on dairy products would be fairly limited, given that the ban applies only to unpasteurised milk. Obviously, farmers are going to be compensated by the EU, but such payments will come with time lags. The agri-food sector accounts for around 11% of total employment, at 180,000. Our worst-case scenario would put 10,000 of these jobs at risk. This figure could rise to 12,000 taking retailers, hauliers and other local economy linkages into account.
Tourism
The tourism industry has already been suffering under the force of travel restrictions imposed a month ago as the government did its utmost to keep the disease out of Ireland. Hotel bookings are down dramatically and it looks like the summer season will be a washout. Although many sporting fixtures are back on, many public parks and national monuments remain closed and people are being discouraged from visiting the countryside. The industry estimates that a total of Ł174 million has already been lost over the last month in overseas cancellations and Ł20 million in domestic cancellations. Bord Fáilte estimates that over Ł500 million would be lost in overseas earnings between March and August. Restaurant bookings are down over 30% according to the Restaurant Association Federation of Ireland, and restaurant closures and job losses are threatened. The Irish Hotels Federation warns that 20,000 out of the 60,000 people employed in hotels could lose their jobs. HIM would take a more conservative estimate of 8,000 for the tourism sector as a whole.
Overall
HIM estimates that the foot-and-mouth crisis will knock 1% off Irish GDP, while the slowdown in the US takes an additional 2.5% away, and capacity constraints a further 1%. Thus we forecast that GDP growth in 2001 will be 6.5% compared to an estimated 11.5% in 2000. In terms of employment, up to 20,000 jobs could be lost as a result of the foot-and-mouth crisis, and another 10,000 jobs are expected to be shed in the tech sector. However, total employment growth is still expected to be positive at around +30,000 versus +77,000 in 2000. In terms of inflationary impact, meat accounts for 5% of the Irish consumer price index. Assuming a 10% rise in food prices, this would add 0.5% to the overall CPI. This could give an annual inflation rate of 4.5% compared to our earlier forecast of 4%.