Growth in Northern Ireland economy even slower than expected
NORTHERN Ireland's economy will not grow at as fast a rate this year than expected, according to a well watched report.
The latest EY Economic Eye Winter Forecast has has revised down its prediction of Gross Value Added (GVA) growth in the north to 1.7 per cent - from the 2 per cent it predicted in the summer.
The worse than anticipated outlook comes as the economy in the Republic recovers at an incredible rate.
EY is forecasting GDP south of the border to rise 5.8 per cent over the year.
However, it was positive on the jobs outlook for the north and said the devolution of corporation tax varying powers would alter the landscape.
For now, it said Northern Ireland growth was hampered by austerity measures and a relatively small private sector.
Michael Hall, managing partner for EY Northern Ireland said: "Austerity is dampening domestic demand in Northern Ireland now in the same way it did in the Republic in recent years, and there have already been considerable job losses in the public sector as a result. We must offset this constraint by attracting more FDI (foreign direct investment) in the private sector. This will be key to ensuring continued growth and uplift in employment in the coming years."
Bringing the corporation tax rate down to 12.5 per cent from April 2018 would "alter the competitive landscape" in the north, EY said
The outlook predicts more investment across Ireland generating greater wealth levels and the possibility for greater trade between the two economies.
“The reduction will greatly enhance NI’s ability to attract FDI and enable the indigenous companies to re-invest savings back into their businesses. Our poll showed that 50 per cent of respondents are ‘moderately optimistic’ about the prospects for business over the short to medium term – which reflects that some good steps have already been taken, but there is still work to do," added Mr Hall.
"The focus now needs to turn to having a strategy on securing maximum benefit from a lower corporate tax rate. We need to evaluate our priorities, for example, what geographies and sectors should we target from an FDI perspective. Northern Ireland has some well-established indigenous businesses in the life sciences/ pharma and technology sectors. We should consider how we can build on this in addition to linking back to education to ensure the skills required are being nurtured at an early stage will be vital.”
The report found economic was uneven across Ireland with urban centres experiencing significantly faster growth than in rural areas.
It said a key challenge for policy makers will be to bridge the gap between urban and rural areas, to avoid economic overheating in specific areas.
The "most pressing need" it said was to increase supply in the residential property market, to accommodate higher growth in coming years.
Shortcomings on infrastructure must also be addressed EY said, "particularly transport links, broadband, energy, water and waste infrastructure".