Danske Bank has today forecast that the Northern Ireland economy grew by 1.1 per cent in 2018 and is set to grow by 1.2 per cent in 2019, a slight upward revision from the Bank’s previous forecasts of 1 per cent and 1.1 per cent respectively.
In the Bank’s latest Northern Ireland Quarterly Sectoral Forecasts report, published today, Danske Bank said 2018 was a year of “modest” growth with only a slight pick-up expected in 2019 in the face of ongoing uncertainty around Brexit, some pressure on household budgets and the local political situation.
The services sectors are likely to continue to underpin growth over the next year, with administrative & support services, professional, scientific & technical services and information & communication leading the way, the report said.
Danske Bank Chief Economist Conor Lambe said: “The slight upward revision of our economic growth forecast for 2018 to 1.1 per cent is largely driven by the recovery of the production sector in the third quarter of 2018.
“We are forecasting that the rate of growth will rise, though only slightly, to 1.2 per cent in 2019. This is assuming a Brexit deal is reached and that the UK leaves the EU in an orderly manner, which, despite the ongoing political turbulence, we still expect to be the most likely outcome.”
Danske Bank are forecasting output growth in the wholesale & retail trade sector of 1.1 per cent in 2018 and 1.3 per cent in 2019.
Growth in the manufacturing sector has been revised upwards, and is now forecast at 1.1 per cent in 2018. Data from the latest Index of Production points to a continued strong performance in the manufacturing sector, with both output and productivity in the sector increasing by 2.5 per cent over the quarter to 2018 Q3. The manufacturing sector is projected to grow by 1.2 per cent in 2019.
Danske Bank said it expects growth in the construction sector to reach 1.3 per cent in 2018, noting that the latest Northern Ireland Quarterly Construction Bulletin pointed to a strong 2018 Q2. Within the construction sector, the strongest increase over the quarter was in housing activity. The Bank expects growth in the construction sector of 1.4 per cent in 2019.
Public administration & defence continues to have the weakest outlook of all the sectors of the Northern Ireland economy. Output is expected to contract by 0.8 per cent in 2018, and by a further 0.9 per cent in 2019.
Labour market outlook
The Northern Ireland economy has continued to benefit from strong jobs growth and Danske Bank estimates that employment growth will reach 1.9 per cent for the whole of 2018. However, jobs growth is expected to slow to 0.5 per cent in 2019 as momentum begins to cool due to the little spare capacity left in the labour market and firms instead have to focus on increasing productivity.
The smaller production sectors, water supply and electricity & gas, are expected to see the largest percentage increases in the number of employee jobs in 2018, rising by 7.8 per cent and 3.9 per cent respectively, while employment in manufacturing is expected to rise by 3.6 per cent.
Danske has revised its forecast for employment growth in the wholesale & retail trade services sector downwards, largely due to revisions in the data for 2018 Q2. The sector is forecast to see employment growth of 1.1 per cent in 2018 and 0.5 per cent in 2019.
The rate of jobs growth in the construction sector has also been revised downwards to 2.5 per cent in 2018. In 2019, employment growth of 0.9 per cent is expected in the construction sector.
Overall, the Bank is forecasting that the unemployment rate in Northern Ireland will average 3.8 per cent throughout 2018 and rise to 4.1 per cent in 2019.
Risks and uncertainties
Brexit and political uncertainty still remain the two biggest risks to economic growth in Northern Ireland.
Conor Lambe added: “Despite being less than three months away from the date upon which the UK is scheduled to leave the EU, there is still a large degree of uncertainty regarding the final Brexit outcome.
“A range of potential Brexit scenarios remains possible, one of which is a no-deal Brexit. While considered an unlikely outcome, a no-deal Brexit, and the disruption that it would result in, is undoubtedly the biggest risk facing the UK and Northern Ireland economies at present.”
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