Business

Northern Ireland's sluggish economy 'will grow 1.2 per cent this year' - Danske Bank

The Northern Ireland economy will grow by 1.2 per cent this year according to Danske Bank's latest forecast

GROWTH in the north's economy continue to be sluggish but will still grow this year by a shade over one per cent - slower than the rest of the UK - Danske Bank's latest regional bellwether says.

All sectors of the region's economy are likely to grow both this year and next, with the exception being public administration (the civil service) and defence.

And Danske has also warned of an interest rate rise coming as soon as next month.

Employment levels are also likely to increase by 0.8 per cent this year and remain largely unchanged in 2018, with annual average unemployment rate in Northern Ireland projected to be around 5.3 per cent in 2017 rising to 5.4 per cent in 2018.

But these forecasts could be torn up because of the continued political uncertainty in Northern Ireland and the risks around Brexit.

Danske Bank's quarterly sectoral forecast paints a mixed picture, and predicts that the north's economy could grow by 1.2 per cent this year and 1.0 per cent in 2018, unchanged from the previous forecasts.

Conor Lambe, Danske Bank economist, said: “There is clear evidence that high inflation, and the resulting fall in real wages, are holding back consumer spending growth and this has been a big factor in the sluggish economic growth we have experienced so far this year.

“With businesses wary of investing in a climate of Brexit-related uncertainty, as well as the UK government continuing with its programme of fiscal austerity, growth is likely to remain subdued over the next couple of years.”

The report also suggests that interest rates could rise relatively soon. The previous expectation of rates remaining on hold until 2019 has been revised and Danske Bank now expect the first interest rate rise to occur before the end of the first quarter of 2018 - with a rise next month a distinct possibility.

Lambe said: “While interest rates are expected to increase at some stage within the next few months, it is important to note that rate rises will probably be very gradual and so the interest rate environment is likely to remain relatively accommodative for some time yet.”

On future risks he added: “There are a number of consequences faced by the local economy due to the absence of devolved government. These include the lack of progress on important areas such as finalising and beginning to implement the industrial strategy and making decisions about how to spend the money allocated by the Conservative-DUP deal.

"There is also the risk that Northern Ireland is under-represented in engaging with the UK Government on Brexit and, without the devolved institutions, local policy-makers are restricted in their ability to help shape the future arrangements that will exist at the border.”

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