The near perfect competitiveness conditions Ireland has enjoyed are over, according to the assessment of the National Competitiveness Council in this year's Competitiveness Scorecard.
The council said that external uncertainties, particularly Brexit, along with domestic issues such as rising house prices, has put Ireland on an inevitable path to competitiveness loss if international economic conditions were to worsen.
"The good news in our benchmarking report is that, despite intense competition, we've continued with strong economic growth in 2017 and we have a very good outlook for growth for 2018-2019 and we remain a competitive economy," said Professor Peter Clinch, chair of the National Competitiveness Council. "What the council has to balance that against is our concern that we expect an erosion of competitiveness in the next years, we've already slipped in two of our competitiveness rankings, and we're very concerned also about the sustainability of the economy in the medium-term," he said.
External threats form a major part of that, with Brexit having the potential to create significant difficulties for Ireland's competitiveness. However many of the issues the council raises are domestic, including rising house prices, transport issues and high levels of debt.
The country's growth is also heavily reliant on a small number of exporting companies, which makes it vulnerable to shocks. "We rely upon a very small number of highly productive companies, exporting a very small number of products and services to a very small number of market destinations," he said. "The top 15 commodities in Ireland account for about 90% of the total goods exports."
Not only is this potentially problematic in terms of growth, Professor Clinch said it also disguises a lack of productivity in some other companies and sectors. To remedy this the council suggests greater supports for SMEs, as well as smart investment in infrastructure projects. Such spending has to be "evidence-based, focussed, transparent, timely and agile" in order to improve productivity and competitiveness, however.
The council also wants to see a widening of the tax base, but this must be done in a way that does not add costs to business. It has previously supported an upward revision of property taxes, for example, and also backed water charges as a means of achieving this, though Professor Clinch accepted that care must be taken not to add costs to consumers too - which would inevitably increase calls for wage rises across the economy. "If we add in issues such as housing and infrastructural deficits - so if people have to pay a large amount of money for their houses they're, of course, going to look for wage increases," he said.
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