The Small Firms Association has warned that while there are signs the economy is performing more strongly than predicted, there will continue to be pressure on employment and business prospects this year. Siobhán Creaton, Finance Correspondent, reports.
In its Spring Economic Statement, the SFA warned there was no room for complacency on inflation and stressed that unemployment figures were masking critical job losses.
It also described housing as the Republic's Achilles heel.
Director Mr Pat Delaney said that despite the higher rate of economic growth evident in the first half of 2004, Irish production costs remained above those in competing economies.
He said the downward trend in inflation had to continue.
"We are beginning to see sustained downward pressure on inflation.
"However, the SFA cautions that in its anti-inflation strategy the Government must aim to maintain Irish inflation below 2 per cent and the current fall in inflation must not be seen as an opportunity to raise indirect taxes or administered charges," said Mr Delaney.
The SFA believes inflation is the greatest threat to regaining lost competitiveness.
"Lowering and maintaining a low inflation environment remains an economic imperative and requires further downward pressure on domestic costs such as insurance, wages, health, education, energy, commercial rates and local charges," he said.
It is particularly concerned about the impact of administered prices, saying recent rises in user charges have simply resulted in increases in public sector wage costs, not better quality, higher efficiency or production.
"When public sector inefficiencies are passed onto the rest of the economy in the form of tax increases and administrative charges, competitiveness deteriorates and jobs are lost" the SFA stated.
The association has also highlighted the latest employment figures issued by the Central Statistics Office which show Irish firms in the exposed sectors of the economy continue to shed jobs at an alarming rate.
It noted that while employment figures increased overall by 2.5 per cent in 2003, 44 per cent of that increase, or 20,300 of those jobs were in the public service.
"The more telling aspect of the employment figures show that overall industrial employment declined by 7,600 and the average number of hours being worked by Irish employees has also fallen to 37.4, showing a decrease in demand for products manufactured here," it said.
Overall, the figures recorded 27,702 redundancies in 2003, more than 11,000 of which were from manufacturing industries. The SFA warned that if this pattern continues then 2004 will be a "disaster" for job retention.
It also focused on the housing market and called on the Government to improve the position of first-time buyers and to reduce the numbers on housing lists.
