Danske Bank has today forecast that the Northern Ireland economy will grow by 1.0 per cent in 2019 and by 1.3 per cent in 2020, unchanged from its previous forecasts earlier this year.
In its latest Northern Ireland Quarterly Sectoral Forecasts report, Danske Bank said that the Northern Ireland economy didn’t pick up much underlying momentum in the first quarter of 2019. Services output fell over the quarter, and while production activity increased, this was likely related to stockpiling in anticipation of the original Brexit deadline.
The report said that the information & communication (for example, telecommunications and computer programming & consulting), administration & support (recruitment and temporary agency work) and professional services (lawyers and accountants) sectors are expected to be the fastest growing over the next two years.
Danske Bank Chief Economist Conor Lambe commented: “Consumer spending is projected to pick up, boosted by rising wages and a moderation of inflationary pressures. But Brexit-related uncertainty is likely to continue to drag on business investment and the slower pace of global economic growth is expected to weigh on exports.
“However, two positives from the first quarter of the year are that local consumer confidence levels increased and jobs growth remained strong. As a result of the strong employment data, we have revised our forecast for jobs growth up to 1.3 per cent in 2019 but then expect it to slow to 0.5 per cent in 2020.”
Output growth in the wholesale & retail trade sector is forecast to be 1.1 per cent in 2019 and 1.3 per cent in 2020.
Expected growth in the manufacturing sector is unchanged at just 0.9 per cent in 2019. The strong growth in this sector at the start of the year was likely influenced by stockpiling ahead of the original Brexit deadline at the end of March, and therefore the higher pace of growth is not expected to be maintained throughout the rest of the year.
Danske Bank has revised down its forecast for growth in the construction sector to 1.0 per cent in 2019 and 1.1 per cent in 2020, due in part to the weak performance of the sector in the final quarter of last year.
Public administration & defence continues to have the weakest outlook of all the sectors of the Northern Ireland economy. Output is expected to contract by 0.5 per cent in 2019, and by a further 0.3 per cent in 2020.
Labour market outlook
The Northern Ireland labour market had a strong start to the year despite the subdued economic environment.
The latest Quarterly Employment Survey showed that in 2019 Q1, the number of employee jobs increased by 0.5 per cent over the quarter and 2.0 per cent compared with the first quarter of 2018.
The information & communication sector is forecast to experience the fastest employment growth in 2019, with the number of jobs expected to rise by 2.9 per cent.
The professional, scientific & technical and administration & support services sectors are also expected to be among the sectors experiencing the fastest employment growth, with the number of jobs projected to rise by 2.4 per cent and 2.0 per cent respectively this year.
Danske Bank is forecasting jobs growth in the construction sector of 1.2 per cent in 2019 and 0.9 per cent in 2020.
Employment growth in wholesale & retail trade is forecast to be 0.8 per cent in 2019 and 0.5 per cent in 2020.
Risks and uncertainties
Once again, Brexit and political uncertainty remain the two biggest risks to economic growth in Northern Ireland.
Conor Lambe said: “If the UK Government were to pursue a no-deal Brexit it would likely face hefty parliamentary opposition but while it is an unlikely outcome, leaving without a deal still remains a possibility. Between now and October, time constraints alone make a renegotiation of the current deal very difficult and the EU has made clear that it does not want to renegotiate the draft withdrawal agreement. Given the lack of a clear way forward, we think a further extension of the Article 50 process appears to be, just about, the most likely outcome at this stage.”
He added: “Despite the start of a new talks process in May, the local political parties have been unable to come to an agreement to restore the devolved institutions, with a number of key issues still unresolved. There is also a possibility that these talks could be put on hold over the summer. Until an agreement is reached, the political stalemate will continue to act as a drag on business investment and consumer confidence.”
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