Childcare Association chief executive Nancy Bell says many early childhood services will have to raise fees or cut quality as a result of the Budget.
Ms Bell says most centres will get a funding increase of just 0.69%, which follows no increase at all last year.
"We're hearing that a lot of those services are struggling financially and while they will welcome any movement, it's not going to solve the problems that they face financially.
"And so we are going to see those services having to either raise fees or cut quality and that is a worrying trend in the sector at the moment."
Ms Bell says 40% of centres will however get an increase of more than 2% because they are in low-income communities.