Danske Bank has today lowered its Northern Ireland economic growth forecasts, and now expects the local economy to grow by 0.9 per cent in 2019 and by 1.0 per cent in 2020.
That is down from the Bank’s previous forecasts, delivered in June, that growth would hit 1.0 per cent in 2019 and 1.3 per cent in 2020.
In its latest Northern Ireland Quarterly Sectoral Forecasts report, Danske Bank said that the Northern Ireland economy likely expanded in the second quarter of the year, but the rate of growth over the first half of the year remained modest.
Danske Bank Chief Economist Conor Lambe said: “We have revised our forecast for economic growth in Northern Ireland downwards for both 2019 and 2020. This largely reflects the modest data for the first half of the year, increased Brexit-related uncertainty and the weaker global economic environment.
“Assuming that a no-deal Brexit is avoided, we expect the Northern Ireland economy to grow by 0.9 per cent in 2019 and 1.0 per cent in 2020, below the 1.2 per cent we expect UK GDP to grow by in both years.
“A combination of strong wage growth and more stable inflation is likely to lead to solid growth in consumer spending, but the lack of clarity around the UK’s future relationship with the EU is expected to continue holding back business investment.”
The report said that the information & communication and professional, scientific & technical services sectors are expected to be the fastest growing parts of the economy over the next two years.
Output in the construction sector is forecast to rise by 1.0 per cent in 2019 and 0.9 per cent in 2020.
Expected output growth in the wholesale & retail trade sector has been revised down to 0.9 per cent in 2019 and 0.9 per cent in 2020. Growth in the other consumer driven sectors has also been revised downwards, including the accommodation & food services sector to 1.0% in 2019 and 1.2% in 2020.
The forecast for growth in the manufacturing sector has been revised upwards to 1.3 per cent in 2019, boosted by the stockpiling activity ahead of the original Brexit deadline in March 2019 and continued output growth in the second quarter of the year. But the outlook for 2020 has been revised slightly downwards to 1.4 per cent, reflecting the weaker external environment.
Public administration & defence continues to have the weakest outlook of all the sectors of the Northern Ireland economy. Output is expected to contract by 0.7 per cent in 2019, and by a further 0.2 per cent in 2020.
Labour market outlook
The pace of growth in the Northern Ireland labour market looks to be experiencing an anticipated slowdown. As such, Danske Bank’s forecast for jobs growth in Northern Ireland is unchanged at 1.3 per cent in 2019 and slowing to 0.5 per cent in 2020.
The information & communication sector is forecast to experience the fastest employment growth in 2019, with the number of jobs expected to rise by 3.7 per cent. Following behind is professional, scientific & technical services — with jobs forecast to rise by 2.8 per cent in 2019 but with employment growth slowing to 1.1 per cent in 2020.
The forecast for employment growth in administration & support services has been revised downwards to 1.6 per cent this year and maintained at 1.0 per cent in 2020. This revision reflects the weakness in the latest employment data.
Danske Bank expects jobs growth in the construction sector of 1.3 per cent in 2019 and 0.9 per cent in 2020.
Employment growth in wholesale & retail trade is forecast to be 0.9 per cent in 2019 and 0.5 per cent in 2020.
Danske Bank expects the unemployment rate to average 3.2 per cent in 2019 and 3.8 per cent in 2020.
Risks and uncertainties
Once again, Brexit and political uncertainty remain the two biggest risks to economic growth in Northern Ireland, while Danske Bank also noted that the threat of a global economic slowdown has increased.
Conor Lambe said: “Over the coming weeks, a number of potential Brexit options are possible, including a no-deal exit, a withdrawal agreement being reached, an extension of the Article 50 period or a general election.
“Predicting what will happen next in the Brexit process is incredibly difficult, but businesses should behave prudently and use this time to ensure they are as prepared as they can be for a worst-case scenario, no-deal Brexit, in case it occurs at the end of this month.”
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