IBEC urges action on infrastructure deficit

IBEC, the major voice of Irish business, has warned of grave economic consequences unless Ireland tackled the infrastructure deficit and restored competitiveness.

In its latest economic review, the employer body warns there is no guarantee that the economy will achieve the 5% envisaged by the Economic and Social Research Institute (ESRI).

Director of economics at IBEC Brian Geoghegan said there were many indicators the economy had "lost its position of super competitiveness" a major feature of the past decade. Rising business costs and a stronger exchange rate had substantially removed that advantage, he said.

To stay ahead, the economy had to tackle several key issues, he warned, including, as a matter of urgency, the large infrastructure deficit.

To do that Finance Minister Charlie McCreevy needed to borrow more this year, but he could do without jeopardising the national finances by allowing the key debt ratio to rise to 1.5% in 2004, Mr Geoghegan said.

That would envisage spending on infrastructure of 6.5bn next year, or 5% of GNP, while at the same time keeping a tight hold on current spending at close to or under 7%.

Mr Geoghegan also warned that if Ireland was to retain its status as a high-earning regional economy, then it would have to be top of the league in terms of skills and R&D, which were necessary if high-income earners were to live and work here.

Despite recovery in the US and to some extent a modest pick up in Europe, the outlook for the Irish economy remained modest and it was far from certain that Ireland would see a return to very rapid growth. GNP would be up 2.6% this year and 3.1% next year, IBEC said in its Quarterly Review of Economic Trends.

It noted the ESRI said the potential was for an average annual GNP growth of 5.3%, similar to the last six years of the 1990s. But the very rapid growth of the 1990s was the result of many factors supporting strong growth. Many of those factors would not apply during this decade.

The competitiveness of China, India and central Europe would increase and there was no guarantee that Ireland would attract US investment on the scale of the 1990s.

Ireland had become a high-cost country and rising business costs and a stronger exchange rate were eroding competitiveness.