Business

NI economy predicted to grow by 1.2% in 2017

Danske Bank has forecast the Northern Ireland economy will grow by 1.2 per cent this year, but economist Conor Lambe has warned inflation will impact on consumer spending
Danske Bank has forecast the Northern Ireland economy will grow by 1.2 per cent this year, but economist Conor Lambe has warned inflation will impact on consumer spending Danske Bank has forecast the Northern Ireland economy will grow by 1.2 per cent this year, but economist Conor Lambe has warned inflation will impact on consumer spending

THE north's economy is expected to grow this year at a faster rate than earlier projections according to the latest forecast from Danske Bank.

The Quarterly Sectoral Forecasts report has suggested that Northern Ireland's economy could grow by 1.2 per cent in 2017, revising the previous prediction for a 0.8 per cent growth in the year.

The positive projection is offset by a slower overall rate of one per cent predicted for 2018, with the bank warning that a squeeze on households' spending power is likely to impact on the local economy going forward.

Both projections remain lower than the predicted UK growth of 1.7 per cent in 2017 and 1.4 per cent in 2018.

The information and communication sector is expected to be the fastest growing in Northern Ireland this year showing a rate of four per cent, followed by the professional, scientific and technical sector (3.2 per cent) and the administration and support sector (three per cent).

The accommodation and food and wholesale and retail trade sectors are also set to experience relatively strong growth of 2.9 per cent and 2.2 per cent respectively in 2017, with the latest Danske Bank Index showing consumer confidence at its highest level since the third quarter of 2015. However, growth is expected to slow in these sectors in 2018 as sustained high inflation eats into households’ spending power.

Danske Bank has raised its growth expectations in light of clarity around Brexit and is now forecasting GVA growth of 1.4 per cent in the manufacturing sector and 0.6 per cent in the construction sector in 2017.

The employment forecast for 2017 has also been revised upwards, with a modest rise in employment levels of around 0.1 per cent now expected. However, the 2018 forecast remains negative, with the number of jobs projected to fall by around 0.2 per cent.

Following a spike in construction activity in the final quarter of 2016 the bank expects the sector to continue some of this momentum into this year and employment growth is now forecast at 0.5 per cent for 2017.

Danske Bank economist Conor Lambe said that while the economic growth forecast has been raised for 2017, he warned a slowdown is expected as inflation takes hold.

"Inflation has picked up in recent months and is likely to rise a bit further later in 2017 as the impact of the sharp depreciation of sterling continues to feed along the supply chain. We expect the average rate of CPI inflation in the UK to be around 2.8 per cent in 2017 and 2.7 per cent in 2018 and this will exert downward pressure on households’ purchasing power. As such, we expect consumer spending growth in Northern Ireland to slow both this year and next.

"Brexit-related uncertainty contributed to a 1.5 per cent fall in business investment in 2016 across the UK, compared with 5.1 per cent growth in 2015. Some firms have postponed capital spending until the UK’s future relationship with the EU becomes clearer and this trend looks set to continue. Therefore, we expect only a very gradual recovery in business investment over the next two years."