Forfás has warned that rising costs will have to be tackled head on in 2008. In its end-of year statement for 2007, the national policy board for enterprise said a national inflation target needed to be set close to that of the ECB's 2%.
During 2007, Forfás said Ireland had a strong exporting sector and stable employment while companies took steps to improve productivity. However, the year did pose problems with a loss in international price competitiveness due to the strengthening euro and higher inflation rates here relative to our trading partners.
Forfás says that total permanent employment in client firms of Enterprise Ireland and IDA Ireland was 290,077 in 2007, up 1,187 from 288,890 in 2006. However jobs losses in these firms increased by 1,979 to 22,657.
It says that investment in R&D in agency firms is estimated to have reached a new record of €2.5 billion last year, equivalent to 1.57% of GNP. It added that the focus of state investment continues to shift towards higher quality and knowledge intensive activities.
Today's report says that overall productivity growth has slowed here from 3.3% over the late 1990s - almost twice the OECD average - to 1.3% over 2003-2006.
Forfás says that exports for 2007 are estimated to have grown by 2.7% for Irish firms and 5.2% for foreign . Services exports are projected to have increased by 15% last year.
Today's review says that over the last number of years, Ireland's economic growth has been driven by domestic demand rather than the country's international competitiveness. However, projected lower domestic demand for this year has reinforced the 'absolute need' to revitalise other sources of economic growth.
'The way this can be achieved is to focus on the development of Irish enterprises supplying goods and services abroad. To reorient the economy towards export led growth we will need to be both innovative and competitive,' commented Martin Cronin, the CEO of Forfás.
He also warned that a further weakening of the US dollar or sterling against the euro would result in an even tougher international trading environment.
'Forfás agrees with the National Competitiveness Council in its proposal for a national programme to restore cost competitiveness including the setting of a national inflation target close to the ECB 2% target,' he said.
