Oil prices could hurt global and Irish economies over the next two years if they persist at current high levels, Minister for Finance Brian Cowen said today.
"If the current high prices are sustained this could have a negative impact on world and Irish economic growth over the next couple of years," Mr Cowen told members of Ireland's Institute of Directors during a lunch at Dublin Castle.
Mr Cowen said the US current account deficit was projected to reach over 6 per cent of US gross domestic product this year.
"This raises the possibility of a sharp depreciation of the US dollar against the euro as part of a correction of this deficit," he said, adding: "When it will happen, no one quite knows."
Mr Cowen said that in order to counter these risks, Ireland had to address its declining competitiveness.
"While we cannot control exchange rates, we can, and must, exercise some control over wage formation in the economy and, as a consequence, domestically determine prices," he said.
"Going forward it is essential that wage growth is consistent with productivity growth," he added.