IBEC has warned that Ireland cannot assume that the current pick-up in the global economy signals a return to the high growth figures that the country enjoyed at the end of the 1990s.
In its quarterly review, the employer's group said that the recent dramatic surge in the US economy had also been matched by signs of life in the European economy. But it warned that Ireland could only expect a modest economic upturn, predicting growth of 2.6% this year and 3.1% in 2004.
IBEC warned that many of the factors that had driven Ireland's rapid growth during the 1990s no longer applied, claiming that Ireland is now a high-cost business environment and would not be able to compete with low-cost economies such as China, India and the emerging economies of Eastern Europe on the basis of cost.
The body also predicted a fall in employment of 1,000 in 2003 and predicted a decline of 4,000 in industrial employment in 2004. The service sector will also be affected as the cap on public service hiring comes into effect.
It said that the current level of construction would not be maintained and predicted a five percent fall in construction activity in 2004.
IBEC also sent a pre-budget message to the government, stressing the importance of maintaining capital spending at five percent of GNP, and keeping current spending increases at a level lower than than the increase in nominal GNP. It also urges the government to withstand the temptation of increase taxation, which it warned might damage the prospect of moderate pay settlements in 2004.
