NI economy expected to contract again after 15.5 per cent rebound in third quarter
THE north’s economy rebounded by 15.5 per cent in the third quarter of 2020, but economists have warned that it’s unlikely to herald the start of a sustained recovery, with further contractions expected in late 2020 and early 2021.
The Northern Ireland Composite Index (NICEI) is considered the closest measure we have to GDP. After a record decline of 13.7 per cent amid the coronavirus pandemic in the second quarter (Q2), it recoiled by 15.5 per cent in Q3 (July to September).
The re-opening of the economy had a major impact on construction, with the sector rebounding by 37 per cent over the Q3 summer months.
Services (22.5 per cent) and industrial production (16.2 per cent) also recorded significant increases.
Overall, the index recorded a 21.4 per cent rebound for the private sector in Q3, with the public sector marginally contracting 0.4 per cent.
But the growth will be likely be short-term according to economists.
Ulster Bank’s chief economist Richard Ramsey said the north’s economy had already been in decline for the four quarters preceding the lockdown in April 2020.
He said the private sector output in Q3 2020 was still 2.1 per cent down on pre-pandemic levels, and 5.4 per cent below Q2 2019.
He has forecast another contraction in the fourth quarter of 2020 (October to December) and the first three months of 2021.
Ulster University economist Esmond Birnie has forecast something similar.
He described the Q3 rebound performance as “partly a false dawn”.
“This impressive performance in Q3 was probably not the herald of a sustained recovery. For most of the final two-and-a-half months of 2020 the NI economy experienced restrictions of various degrees of severity.
“The likelihood is that NI GDP will show declines in both the final Quarter of 2020 and the first Quarter of 2021 (albeit, not as severe as that which happened in March-June 2020).”