THE NORTH’S economy is likely to return to growth next year but it will be besieged by rising taxes and higher unemployment, a leading economist has predicted.
Ulster Bank chief economist Richard Ramsey believes that although Northern Ireland will soon emerge from the recession, it will be several years before it returns to the boom times of 2007.
Mr Ramsey said any improvement in the local economy would be hampered by “inevitable cuts in public spending” and the “performance of the Republic of Ireland economy”.
In the latest Ulster Bank Quarterly Economic Review, published today, the economist said he expected a contraction locally of 4.5 per cent for 2009.
Mr Ramsey suggested the economy would expand by just 1 per cent next year and predicted low growth for several years.
He said Northern Ireland would struggle to return to peak employment levels by 2015.
“The unemployment statistics significantly underestimate the true level of unemployment in Northern Ireland. Unlike the UK, Northern Ireland has witnessed a sharp increase in the numbers of economically inactive since the downturn began.
“These are individuals neither in nor looking for work and include students and those on sickness benefits,” Mr Ramsey said.
He said he believed impending public spending cuts and short-term pressures such as a shortfall in capital receipts were going to cause severe pain.
“Northern Ireland will experience the biggest public-sector expenditure cut on record. A reduction in expenditure of £730 million [€802 million], which some are predicting, would be the equivalent of shutting down the Department of Agriculture and Rural Development for three years,” the economist warned.
Mr Ramsey said it was time for the North’s Executive to take urgent action.
“The urgency has shifted towards the short term and how Northern Ireland can limit the damage currently being inflicted on the local economy.
“The task for economic stakeholders and the Executive is not so much advancing the 2007 version of the economy but instead recouping as much of the lost output and employment as possible. This will be no easy task.”
