Wales’s “creaking” road network needs attention, business leaders said in the wake of the draft budget.
Revenue spending for the economy and transport department, led by deputy first minister Leuan Wyn Jones, will be £10M less in 2013-14 compared to this year.
In real terms it faces an 8.1% cut over the next three years.
The department’s capital budget will fall by £116.5M over the same period.
The Institute of Directors (IoD) welcomed a commitment to protect spending on skills and acknowledged the Assembly Government faced a “difficult balancing act” following cuts imposed in Westminster.
But it warned of the risks of not restoring the UK’s financial stability, and said capital schemes and infrastructure projects should not be “radically diminished”.
The Assembly Government faces an overall capital budget cut of 40.6% after inflation over the next three years.
Jones called time on a so-called grant culture of wooing foreign investors with taxpayer-funded handouts when he published his economic renewal programme in July.
The budget says spending will be targeted on “wide systemic issues” such as infrastructure, research and development, and improving the conditions to help businesses operate.
The capital budget for improving and maintaining the trunk road network will fall from £75.4M this year to £32.8M in 2012-13.
Despite the shrinking capital budget, the Assembly government says a bigger proportion of spending will go on green transport. Free bus passes, currently held by some 650,000 people, will be protected.
IoD Wales director Robert Lloyd Griffiths said: “It’s vital that Welsh Assembly Government (WAG) ministers now make wise spending decisions and do all in their power to preserve vital infrastructure investment.
“Key parts of our infrastructure are creaking, particularly the roads network.
“It’s disappointing that WAG has chosen to cut significantly the already inadequate sums it spends on transport. This does not seem to sit comfortably with their avowed position on encouraging economic growth.
“Spending has increased hugely since devolution and it is time for the taxpayer to get a proper return on that spending.
“Reductions in input should not be synonymous with reductions in output.”