Business

Danske Bank gives 'Big Picture' on global growth - and north's economy will benefit

Global growth is predicted to run at 3.1 per cent this year
Global growth is predicted to run at 3.1 per cent this year Global growth is predicted to run at 3.1 per cent this year

PREDICTED global recovery of 3.1 per cent this year will strengthen "small open economies like Northern Ireland", Dankse Bank chief economist Angela McGowan claims.

Commenting on the bank's latest 'Big Picture' report - which also forecasts growth in the euro area in the second half of this year - she linked global growth to recovering oil prices and and a "cyclical lift" in China.

And looking to the year ahead, the outlook is even better, with the bank calculating increased growth of 3.5 per cent in 2017.

Last year the global economy moved into slump territory due to the decline in oil prices which hurt US investment growth and a "hard landing" in the Chinese construction sector caused by an over-supply of housing.

Downward pressure on economic activity then spread to emerging markets outside China - particularly commodity exporters - but Ms McGowan said both these impediments to growth had now faded.

"We have seen significant improvement in the wider economic climate since the turn of the year," Ms McGowan said.

"This is a good thing because it is widely recognised that a global recovery is very important for a small, open economy like Northern Ireland.

"However, as always, risks hover in the background. Brexit is currently the biggest risk to the economic outlook, but even if this particular risk fades in the second half of this year, uncertainty around the US presidential election may take over as a dark cloud on the global horizon."

With regard to the economic temperature across the Atlantic, she said the US economy was back to "cruising speed" as the oil shock eased and private consumption remained strong.

Meanwhile, our nearest trading neighbour, Europe, has now expanded for three years in a row, heralding stronger support from investments in the future.

"Investment in the euro area is expected to strengthen in the second half of this year for a number of reasons," Ms McGowan added.

"Business sentiment should improve after the UK referendum and Danske Bank expects the euro area economy to grow by 1.6 per cent this year and 1.7 per cent next year.

"At 10.2 per cent, the unemployment rate in the euro area remains on a clear downward trend and has now reached its lowest level since 2011.

"External financing is also more available in the euro area, costs of borrowing are historically low and progress in the US and Chinese economies will support foreign demand."