DANSKE Bank now expects the Northern Ireland economy to contract by around 11 per cent this year due to the impact of coronavirus.
The north’s biggest lender previously anticipated a 7.5 per cent contraction in 2020, but said it had revised its forecast downwards to reflect the latest economic data.
A new report from the Department for the Economy (DfE) this week estimated that the overall economic output in Northern Ireland is around 25-30 per cent below normal levels.
On Tuesday, Bank of England economist Andy Haldane said the UK economy is on track for a ‘V-shaped’ recovery.
But DfE’s report also concluded “the scope for a quick rebound looks to have faded”. It highlighted that the north continues to lag behind the rest of the UK, citing research indicating that economy shrank by 21.5 per cent here in April, worse than the 20.4 per cent contraction recorded by the UK.
Data from the first quarter has also flagged up the disparity. Economic output here fell by an estimated 3.9 per cent in Q1, compared to the UK’s 2.2 per cent.
Danske Bank’s chief economist Conor Lambe said the recovery in Northern Ireland is likely to be much more gradual.
He forecasts the north’s economy will grow by seven per cent in 2021, down from an earlier prediction of 7.5 per cent.
It suggests that at best, the north could be in line for a so-called ‘tick’ shaped recovery.
The bank’s forecast includes the presumption that the UK and EU will strike a free trade agreement by the end of this year, albeit with frictions, including on the movement of goods between Britain and the north.
But it warned that a no-deal scenario would likely slow the pace of the economic recovery.
Danske Bank has forecast that unemployment will increase to around 5.5 per cent by the end of this year.
Ulster University’s Economic Policy Centre has previously said the unemployment rate could rise to 12 per cent this year, with the jobless rate among 16-24 year-olds rising to 26 per cent.
Danske Bank anticipates that the annual unemployment rate for 2020 will average out at 5.5 per cent by the end of the year.
Conor Lambe said the economic hit in the second quarter is likely to be substantially larger than Q1 to the imposition of the lockdown restrictions and the temporary closure of many businesses.
“Given the ongoing easing of the restrictions, the economy should return to growth from the third quarter of this year but the recovery is expected to be a gradual one,” said the economist.
“And despite our relatively strong annual growth forecast for next year, economic output is still expected to be around 3-4% below its pre-coronavirus level in the final quarter of 2021.”
