The falling dollar has driven up operating costs for US multi-nationals based in this country by as much as 30 per cent, according to a leading economist.
According to Economic and Social Research Institute (ESRI) economist Mr Danny McCoy, when companies like Microsoft translate the cost of operating here back into dollars, it will have risen by up to 30 per cent.
The ESRI believes the euro-dollar exchange rate will settle at around $1.15-$1.20 to €1.
"It has overshot that, but it should stabilise at around that range," he said.
Mr McCoy yesterday addressed the Chambers of Commerce of Ireland (CCI) annual conference in Galway.
He predicted the euro's strength, combined with falling wholesale prices, would see inflation easing back to around 3 per cent over the next year to 18 months.
He told The Irish Times that the latest Central Statistics Office (CSO) figures show that wholesale prices were down 7.5 per cent in April.
Mr McCoy said this was partly due to the euro's appreciation against sterling, which has cut the cost of goods and raw materials imported from the UK.
"There's also a sense of reality in the labour market, people realise that it's not a one-way bet any more, wage demands are likely to fall and we think they will be about 4.5 per cent this year and 3.5 per cent in 2004," he said.
He also argued that concerns about competitiveness could best be tackled by productivity.
"If productivity matches the cost, then competitiveness is not an issue," he said.
Speakers at the CCI conference also included IDA Ireland chairman Mr John Dunne and Microsoft Ireland general manager Mr Joe Macri.
Mr Macri told the conference that while Ireland was still a "great place to do business", a slip in overall competitiveness would make it difficult to attract new foreign direct investment in the future.
Mr Dunne said the multi-national sector now employs 133,000 people and contributes €60 billion a year to Irish exports.
But he warned that Ireland needed to change its approach if it were to attract foreign investment.
Mr Dunne told the gathering that part of IDA Ireland's focus included promoting Ireland as a high-skills, high-value location, as well as researching and attracting new areas of business.
CCI president, Mr Mark Staunton, said the combination of increasing insurance and labour costs, along with exorbitant commercial rates and rising service charges, was crippling Irish business.
"How can Irish companies compete at a global level when the Government is doing little to alleviate these costs?" he asked.
Mr Staunton added that domestic business and local communities should also take some responsibility for keeping Ireland competitive, and they should not just leave it up to Government to do so.
