IBEC has warned Ireland's high cost economy cannot be sustained and our strong growth is unsustainable if we don't improve productivity and competitiveness.
In its fourth quarter economic review, David Croughan, IBEC Chief Economist said that the Irish economy will be strong again this year, with growth of 5.5%, which is only a little slower than 2006.
'The impetus will continue to come from the domestic sector with consumer spending expected to grow by a strong 7%', he said.
However, he said that recent job loss announcements are a concern and demonstrate the difficulties some companies are experiencing.
'Ireland's high cost economy cannot be sustained without significant increases in productivity; the loss of competitiveness must be reversed', he said.
He said that for this reason the €184 National Development Plan 2007-2013 is timely; but that we must learn lessons from the mistakes.
The report says that balanced regional development is the most challenging objective, which has been hindered in the past due to lack of co-ordination at local level.
IBEC says in recent years the Irish economy has enjoyed strong growth, but that it is unbalanced and unsustainable, and our competitive position has slipped.
The report said :'It is time to take stock and steer policy towards equipping the economy to produce high value knowledge based goods and services in an increasingly challenging global trading environment.'
Mr Croughan said though global stock market turmoil and concerns on the weakening US economy are likely to make trading conditions more difficult, we should not be too quickly influenced by the most recent downbeat indicators from the US - as many are subsequently revised.
He said although US growth would undoubtedly be downgraded but, on the other hand the latest ECB forecasts of 8 March revised euro area growth this year up to 2.5%.
The report also said that employment grew by 4.3% in the final three months of 2006 - compared to the fourth quarter in 2005, and employment growth averaged 4.4% last year.
The report also found that consumer spending growth grew by an annual rate of 6.2% in the first nine months of 2006.
IBEC estimated that GDP grew by 5.8% and GNP by 6.2% last year and forecast that GNP growth will be up 5.6% in 2007.
It also said that inflation is expected to be just over 4% in 2007.
