Business

Northern Ireland economic growth subdued in 2016, Danske Bank forecasts

The services sector, led by technology, is expected to provide a modest boost to the north's economy this year

A GROWING services sector will boost the Northern Ireland economy this year, Danske Bank has forecast.

However, in its latest quarterly sectoral forecast report, the bank revised down to 1.8 per cent its guess at how much the Northern Ireland's economy will expand this year, due to ongoing austerity.

It anticipates growth will accelerate to 2.1 per cent in 2017.

Danske Bank said consumer spending will likely be "more measured" in the second half of the year as cut backs, particularly public sector job losses, take hold.

And it said uncertainty ahead of a referendum in the UK's relationship with the European Union had the potential to "drag down investment levels"

The technology sector is expected to be the best performing of the year with 4.8 per cent expansion forecast.

That is ahead of administration and support services (4.3 per cent) and professional and scientific services (3.1 per cent).

Moderate growth is also anticipated in the retail, manufacturing and construction sectors.

Although Danske Bank said it assumed the euro area economy would continue to strengthen in 2016 it said the "foreign exchange dilemma still presents significant uncertainty for local manufacturers".

With sterling also expected to remain strong throughout the year, it could make the north's manufacturing sector less competitive when selling into Europe.

The bank’s chief economist in Northern Ireland Angela McGowan said the pace of growth in the north's economy would "not be overly exciting".

"Although the annual growth rate is expected to be around 1.8 per cent, there are, as always, a small number of sectors that will grow at an ‘above average’ rate and of course the public sector will continue to shrink," she said.

“In the local executive’s budget during December 2015 we saw the announcement of seven flagship infrastructure projects which include the significant A5 and A6 road upgrades. In total, over £1 billion of government investment will go into these flagship projects in the next five years. This is without doubt good news for the local construction sector which currently employs around 56,000 workers.”

“The Northern Ireland economy will continue to expand in 2016 but at a very moderate rate. Although the public expenditure cuts do not look as harsh as we had initially expected, there is still a dire need for the private side of the economy to expand output, raise revenue streams and create jobs.

“Hopefully the macro economy will not present too many surprises for our business sector in the year ahead as economic stability is conducive to investment. However, there are some uncertainties on the horizon which cannot be ignored, including Brexit and the impact of low oil on emerging markets.”

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