Anyone looking at just the headline figures for exports of goods last year will have been under the impression that our domestic industry was enjoying an export boom.
Total exports in the first 11 months of 2005 reached CYP 619.14 mln, an impressive 23.7% rise on the same period of 2005.
Looking a little deeper into the figures, however, it is clear that although overall exports did extremely well in terms of value 2005, those produced by the domestic market did badly.
Exports of domestically produced exports actually fell by 0.52% to CYP 217.64 mln in the first 11 months, compared with CYP 219.8 mln in the same period of 2004.
This is despite the fact that three domestic star performers–halloumi, pharmaceuticals and furniture–enjoyed a rise in exports during that period.
Spotting this kind of trend is harder than it used to be for a couple of reasons. First, presumably as a result of EU rules, the Statistical Service in April 2004 stopped producing those useful Excel tables that used to separate out domestically produced exports from re-exports (those which essentially do not leave Limassol port).
Moreover, presumably for the same EU reasons, CYSTAT’s summary verbal reports refer only to total exports and “dispatches” (that’s EU-speak for exports to other EU countries) and not to domestically produced exports versus re-exports.
So only the very determined will discover that those apparently fantastic export figures are not all they seem to be.
Oil and machines
So if domestically produced exports fell by CYP 1.16 mln but total exports rose by CYP 119 mln, where did that ‘growth’ come from?
The answer lies in two subsectors: oil and machines.
Around half of the CYP 119 mln rise in total exports came from an increase in exports of “Mineral Products” (which must be mainly oil).
Exports of mineral products rose by CYP 62.0 mln, or by 141.0% in the first 11 months of 2005 compared with the first 11 months of 2004.
Since the average price of Brent crude rose by 42% in 2005 (albeit in dollar terms), we can assume that this rise in mineral product exports was caused by both a rise in the price of oil and a rise in the tonnage exported.
A rise in tonnage would make sense, given that international oil prices rose largely as a result of insatiable demand from China.
The other half of the total exports increase came from machinery and electrical equipment, which rose by CYP 56.1 mln in the first 11 months of the year to CYP 153 mln.
This category, which does not include transport equipment, appears to consist of items such as computers, household goods and televisions.
Since Cyprus does not produce these domestically, this must also be a reflection of demand on the re-export side.
Re-exports benefiting from EU membership?
Higher export values in the machinery sector is a good sign, especially as growth in global trade in goods decelerated sharply in 2005, according to the Economist Intelligence Unit’s latest global forecast.
If Cyprus saw the export value of machinery rise strongly in a year that saw deceleration globally, it could mean that the re-export industry is benefiting Cyprus’ EU membership, which began in May 2004.
And if that is so, the future looks quite bright.
After decelerating sharply in 2005, growth in world trade is forecast by the EIU to stabilise in 2006-07, before rising to 7.5% per year in 2008-10.
Emerging Asia is expected to see the fastest rates of export growth over the forecast period, closely followed by east-central Europe.
Fiona Mullen
