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Danske Bank report predicts slower growth for 2017

.©Press Eye Ltd Northern Ireland - 14th November 2012Mandatory .Northern Bank rebranded as Danske Bank..Northern Bank has announced it is to rebrand as Danske Bank, the name of its Danish parent company..
Andrew Madden

ECONOMIC activity in the north is expected to slow this year as consumers start to feel the pinch of inflation, according to a report.

Danske Banke's latest quarterly sectoral forecasts predict that consumer price inflation will rise from its current rate of 1.8 per cent to around 2.5 or 3 per cent in the second half of 2017.

Although the Northern Ireland economy enjoyed a solid performance last year with overall growth of 1.5 per cent, the strongest rate since 2007, this year GVA growth is expected to drop to 0.8 per cent.

As the post-referendum picture is still emerging, uncertainty around Brexit is also set to impact future investment levels, which will in turn hit jobs in the manufacturing and construction sectors heavily this year.

Danske Bank analysts anticipate 800 job losses in construction and 700 in manufacturing by the end of the year.

Agricultural employment, on the other hand, is expected to increase modestly this year and in 2018 as the fall in the exchange rate makes produce prices more competitive.

And public sector job losses are also expected to continue to be a net drag on employment growth over the short and medium-term as continued austerity measures impact on departmental funding.

It is also important to note that Stormont is yet to produce a budget for the year, having a knock-on affect to financial support that can be offered to certain industries, such as agriculture.

Around 1,700 job losses in the public administration and defence sectors are forecast for 2017 and a further 1,400 losses in 2018.

One positive to come out of the Brexit vote that is expected to continue this year is the fall in the value of the pound increasing exports.

Nationally, business investment had slowed prior to the referendum as uncertainty weighed on corporate confidence; capital spending is estimated to have fallen by 1.5 per cent in 2016, after rising by slightly more than 5 per cent in 2015.

Though the corporate sector continues to enjoy a strong financial position, Brexit-related uncertainty is likely to persist with some firms set to postpone capital spending until the UK's future trading relationship with the EU becomes clearer.

Taking this into account, Danske Bank's analysts expect only a very gradual recovery in business investment within the UK to around 1.1 per cent this year and 2.4 per cent in 2018.

Looking at other risks and uncertainties which could impact the north's economy in the future, political instability in the wake of fresh Stormont elections could negatively effect growth and the perception of instability risk discouraging potential foreign investors.

Alongside Brexit, the potential for further austerity measures being implemented by the UK government also poses a threat to Northern Ireland's economy.

Constantly falling short of fiscal targets since the financial downturn, government figures may opt for further cuts if future tax revenues disappoint.


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