Despite the impact of a strong euro and high inflation in Ireland relative to our trading partners, 2007 was another good year for Irish exports, according to Forfás.

However, in its end-of-year statement, published today, the national policy board for enterprise and trade cautioned that 2008 would be more challenging.

"Fifteen years of economic success, however, has provided Ireland with resources and strong enterprise foundations, which means that we are now better placed than ever before to tackle issues and successfully progress to the next phase of economic development," said Martin Cronin, chief executive, Forfás. "Substantial challenges for enterprise will persist, but Ireland is well-placed to address them."

The statement endorses the National Competitiveness Council's proposal for a national programme to address cost competitiveness, including the setting up of a national inflation target close to the European Central Bank target of 2 per cent.

Forfás says that with domestic demand forecast to fall this year, Ireland will have to look to other sources of economic growth.

"To reorient the economy towards export-led growth, we will need to be both innovative and competitive," Mr Cronin added.

The State agency estimates that exports by Irish-owned firms were up 2.7 per cent in 2007, while exports by foreign-owned entities grew 5.2 per cent. The services sector continued to grow strongly. Forfás says services exports are projected to have increased by 15 per cent in real terms in 2007 following growth of 11 per cent in 2006. At current growth rates, services will account for more than 50 per cent of export earnings by 2010.

Forfás adds that private and public spending on research and development reached €2.5 billion in 2007.