North’s economy to grow faster than predicted

The Northern Ireland economy could grow by 0.8 per cent this year, which is a slightly faster rate than previously predicted, according to new forecasts from Danske Bank.

The bank has modestly upgraded its previous forecasts for economic growth because it believes Northern Ireland’s economy has performed better than it had expected in the wake of the Brexit vote.

According to Danske’s Quarterly Sectoral Forecasts report, published on Tuesday, the local economy will grow by 0.8 per cent this year and 1.0 per cent in 2018 – previously growth of 0.5 per cent had been forecast for this year.

But this still falls sharply below last year’s expectations when the economy was predicted to grow at 1.5 per cent – the strongest rate of growth since 2007.

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Post-referendum picture

Danske Bank economist

Conor Lambe

has cautioned that the latest forecasts need to be viewed against the backdrop of a still-emerging post-referendum picture which could yet deliver a few surprises.

“A weaker outlook for demand suggests we might see a slight deterioration in the labour market over the short term. There are also a number of downside risks which could lead to lower growth than we are currently forecasting, including political instability and a larger-than-expected negative impact on confidence as a result of Brexit,” Mr Lambe said.

The bank, however, remains confident that consumer spending will continue to rise in the next few years, albeit at a much lower rate than last year.

“The weaker pound will offer a modest boost to net exports. Therefore, we expect the Northern Ireland economy to continue growing over the next couple of years,” Mr Lambe added.

Caveats

But he stresses there are caveats to this, including rising inflation fanned by the impact of a weaker sterling, the prospect of political instability, a larger-than-expected Brexit-related impact on consumer and business sentiment and further austerity.

Mr Lambe said: “There is uncertainty around the impact of Brexit and what it means for the local economy and that is something that is not going to change anytime soon.

“The only thing we do know for certain is that change is coming. For a number of businesses across Northern Ireland, the loss of access to the EU single market and potential future barriers to cross-border trade are major concerns.”