Sluggish productivity, inadequate infrastructure and insufficient investment in education are threatening Ireland's competitiveness, according to a major economic report published today.
The report by the National Competitiveness Council identifies a number of policy challenges that must be addressed if the living standards are to be maintained. Sheltered sectors such as utilities, retailing and agriculture are lagging behind their foreign counterparts, according to the council.
The report identifies a widening productivity gap between Ireland and its main global competitors. In 2003, Irish workers produced on average, 16 per cent less for each hour worked than their US counterparts, equivalent to €5,329 per person.
The council's report shows that Ireland remains the most expensive country in the eurozone for consumer goods and services, and the second most expensive country in the EU behind Denmark.
The report warns that productivity gains have been confined to a few sectors dominated by multinationals and have not been enough to offset the rising cost of doing business in Ireland.
The report found strong evidence that costs such as electricity, waste, and office accommodation are higher in Ireland than in other countries, though insurance costs appear to be moderating.
The strengthening euro against the dollar was the biggest cause of the deterioration in Ireland's cost competitiveness, although homegrown inflation also played a significant role, the report said.
Irish consumer price inflation dropped close to the EU and euro zone average over the course of 2004. Prices and costs have increased by 18 per cent relative to our major trading partners over the period 1999-2004.
The Minister for Enterprise Trade and Employment Michael Martin said the council's report showed there clearly is room for improvement the partnership talks now getting under way will strongly influence our competitiveness and economic progress over the next few years.