A slow start to the year and heightened uncertainty surrounding Brexit mean economic growth is likely to remain subdued, according to a new report from Danske Bank.
In the Bank’s latest Northern Ireland Quarterly Sectoral Forecasts report, published today, Danske Bank is forecasting that the Northern Ireland economy will grow by 0.9 per cent in 2018 and 1.1 per cent in 2019.
Danske Bank also expects relatively modest GDP growth in the UK with the economy forecast to grow by 1.3 per cent this year and by 1.4 per cent next year.
The Bank expects the average rate of jobs growth in Northern Ireland to be positive this year and next year. The number of employee jobs is forecast to increase by 0.7 per cent in 2018 and 0.2 per cent in 2019.
Conor Lambe, Danske Bank Chief Economist, said: “In the first quarter of 2018, the Northern Ireland economy experienced a rather sluggish start to the year as a combination of above-target inflation, adverse weather conditions and continuing political uncertainty, regarding both the lack of an Executive and Brexit, acted as a drag on growth.
“The economy is expected to perform slightly better in the rest of the year but consumers and businesses are still facing challenges. Household spending power is slowly recovering but consumers remain under some pressure and heightened uncertainty surrounding Brexit is negatively affecting business investment. These factors are likely to lead to underwhelming economic growth in both 2018 and 2019.
“One positive that came out of the data for the start of 2018 was a very healthy rate of jobs growth, with the highest annual increase in the overall number of employee jobs since the series began in 2005. Given this strong data, we have revised our forecast for employment growth in 2018 upwards from 0.4 per cent in our last report to 0.7 per cent in the latest release.”
The services sector should continue to underpin growth in Northern Ireland, with strong performances forecast for the administrative & support (3.2 per cent in 2018 and 3.5 per cent in 2019), information & communication (3.1 per cent in 2018 and 3.4 per cent in 2019) and professional services (2.4 per cent in 2018 and 2.8 per cent in 2019) sectors.
Following a rise in consumer confidence in Northern Ireland, and strong first quarter jobs data, the Bank has revised its forecasts for wholesale & retail trade up slightly to 1.4 per cent in 2018 and 1.2 per cent in 2019.
Construction growth in Northern Ireland is forecast at 0.9 per cent in 2018 and 1.3 per cent in 2019, following a strong end to last year.
Growth in the manufacturing sector is forecast at 0.7 per cent in 2018 and 1.0 per cent in 2019. The latest data showed a weak start to the year for manufacturing output and high input costs, as well as the continuing uncertainty regarding future trade policy following Brexit, are impacting potential growth in this sector.
Public administration & defence continues to have the weakest outlook of the sectors of the Northern Ireland economy, with a decline in output of 1.2 per cent forecast for 2018 and a further 0.9 per cent contraction expected in 2019.
Labour market outlook
The administrative & support services sector is expected to have the fastest jobs growth in 2018 of 2.5 per cent, closely followed by construction (2.4 per cent) and professional, scientific & technical services (2.3 per cent). In 2019, these three sectors are expected to experience employment increases of 1.2 per cent, 1.3 per cent and 1.1 per cent respectively.
Employment in the manufacturing sector is forecast to grow by 0.7 per cent in 2018 and 0.4 per cent in 2019. Despite the latest data showing a decline in manufacturing output in the first quarter of 2018, the sector experienced strong jobs growth of around 1,200 additional jobs – the largest quarterly increase since 2014.
Wholesale & retail trade, the sector with the largest number of employee jobs, is forecast to experience a decline in the number of jobs of 0.1 per cent in 2018 and a further 0.1 per cent fall in 2019.
Overall, the Bank is forecasting that the unemployment rate in Northern Ireland will average 3.3 per cent in 2018, but rise to 3.6 per cent in 2019.
Risks and uncertainties
A number of risks and uncertainties could affect the economy going forward. These include political uncertainty in Northern Ireland, Brexit and global issues such as rising protectionism.
Mr Lambe added: “Northern Ireland has now been without a devolved government since January 2017 and concerns remain over the lack of local decision-making and inadequate representation in the Brexit process. This political uncertainty is negatively impacting both consumer and business confidence.
“As the UK continues to make arrangements for leaving the EU in March 2019, there are still significant decisions to be made. With regards to the future trading relationship, the UK has yet to set out any meaningful, realistic and detailed plans for how it sees trade and border arrangements with the EU operating in the longer-term. With time running out, the UK Government now needs to accept that it’s decision time and take the steps needed to minimise the damage that Brexit will cause to the UK and Northern Ireland economies.”
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