The Economic and Social Research Institute has called for a more flexible model for national wage agreements.
In its latest quarterly commentary, the Institute says the current deal is too rigid and does not allow for reduced pay increases in an economic downturn.
The Institute predicted that the economy will slow this year. It lowered its forecast of 2001 gross domestic product growth to 6.7%, from an estimate of 7.3% in December. Growth would also slow to 6.2% in 2002.
The decision to cut the growth forecast was based on the uncertainties emerging from the US slowdown and the foot and mouth disease crisis, the report said.
Last month, the Central Bank reduced its 2001 growth forecast for Ireland to 7.5%, warning that economic expansion could be further hit by the global economic slowdown and foot-and-mouth crisis.
The ESRI also predicted that consumer price inflation would fall to 4.2% in 2001 from 5.6% last year. 'Domestic price pressures will continue to rise reflecting higher wage growth of 11.1%, but not by enough to outweigh the falling external price components,' the report said. Inflation is expected to average 3.6% in 2002, it said.
The report also criticised the new national savings scheme, saying it was a missed opportunity to link savings to wage bargaining.
