The latest figures from the Central Statistics Office confirm that the economy has been hit by a serious slowdown. By any measure growth was sluggish in the first quarter of this year, with the multinational sector suffering and the domestic economy remaining flat.
It is not a surprising picture, given the poor international economic conditions, but it does highlight the extraordinary deceleration in growth from the 8 to 10 per cent annual rises of the 1997-2000 period.
The figures suggest that the economy grew hardly at all late last year and early this year, with Gross National Product in the first quarter standing just 0.8 per cent above the same period last year. It is important to note that the figures do not point to an actual decline in economic activity, but nor do they show any sign of buoyancy. Consumer spending growth is sluggish - and more recent indicators have shown that confidence has fallen - investment levels are dropping and exporters are suffering.
Looking to the rest of the year and into 2004, there are two key questions. The first is whether the international economy is set for recovery. Here the evidence is mixed, although there is some hope of a gradual upturn in US growth later this year, which would certainly improve prospects for growth in the Republic moving into 2004.
The second question is the extent to which the Irish economy might benefit from an international upturn. Certainly, stronger international growth would help exporters and feed through to jobs and spending. However, there are concerns that the decline in competitiveness over the past couple of years could affect growth prospects here.
It is a difficult backdrop for the Government, as it plans the budget for next year. From an economic viewpoint, it is clear that competitiveness must be a central consideration as it considers its financial package. In the short term this means avoiding a repeat of the inflationary impact from this year's Budget. It is essential that negotiations due next year on national wage increases take place against a backdrop of low inflation.
However, other policy areas will also have a key impact on competitiveness. The Tánaiste, Ms Harney, this week announced the creation of an enterprise strategy group, to provide policy guidance. While the group will no doubt provide many useful ideas, the Government must realise that the key issues are already clear. It needs a strategy to pay for and deliver the kind of infrastructure improvements which the economy so urgently needs. And it must find a way to deliver better public services against a backdrop of tighter public finances.
Together with competition policy, these need to be the cornerstones of a Government approach to boosting economic competitiveness. The latest growth figures show the urgency of pursuing this agenda if the economic gains of recent years are to be safeguarded - and built on when the international recovery arrives.