Northern Ireland’s economy will grow at a moderate rate in 2015 and 2016, with GDP and employment levels expected to rise moderately, but downside risks are casting a shadow on the outlook, according to the latest report from Danske Bank.
However the agriculture sector is expected to contract by 1.4 per cent this year and indeed better times are not forecast until the middle of 2016 at the earliest.
The Quarterly Sectoral Forecast report, published today by Danske Bank, suggests that the economy will expand by 2 per cent this year and 2.2 per cent in 2016.
The report notes that economic prospects could be dented on by local political uncertainty and the potential consequences for both foreign direct investment and the delivery of public sector infrastructure projects. In addition, the slowdown in the global economy stemming from China and falling commodity prices have increased risks for the economy in general.
Danske Bank’s Chief Economist Angela McGowan said: “The Northern Ireland economy continues to expand but at a very modest level. It is good to see a number of leading indicators continue to improve, such as the housing market, the Index of Construction, the Index of Services and the Northern Ireland Composite Economic Index. However, while some sectors such as ICT are thriving, others such as agriculture and the public sector face significant challenges. Global growth is weakening and NI will not stay immune to the effects of this slowdown.”
The report sets out the key factors affecting the local economic outlook. On the upside, stronger household spending power in the short-term driven by low inflation and improving real wages will help to support growth. In addition, strong corporate finances and sustained strength in house building will both provide direct support to the local economy. However, downside risks are emerging. Political uncertainty locally and the UK’s potential exit from the EU could defer investment decisions, while the relatively strong pound will also weigh on exports. The global economic slowdown also has implications for local exporters, manufacturing and investment.
Best performing sectors
A number of sectors within the economy will experience growth well above the average both this year and next. The highest growth sectors this year include: ICT (5.4 per cent), Administration & Support Services (4.2 per cent), Hospitality (3.8 per cent), Wholesale & Retail (3.7 per cent), Professional and Scientific Services (3.6 per cent), Transport & Storage (2.8 per cent) and Arts Entertainment & Recreation (2.5 per cent).
Moderate growth sectors
Moderate growth is also expected for the construction and manufacturing sectors both of which should grow by just over 2 per cent this year and next. However, the report notes that sterling and slowing world demand could weigh on export performance for local manufacturers. In addition, local government uncertainty could impact upon the construction sector if public investments are delayed.
The agri-food sector has encountered a perfect storm this year in terms of rising supply of commodities, reduced demand from China and emerging markets, a strong pound and high operating costs. This sector is expected to contract by 1.4 per cent this year and indeed better times are not forecast for the agri sector until the middle of 2016 at the earliest. In addition, the public sector is expected to contract – particularly public administration.
Ms McGowan said: “There is no doubt that some elements of Northern Ireland’s private sector are flourishing. These sectors have created a large proportion of jobs during the recovery and of course we must recognise that a full rebalancing of the economy takes time. In particular, local and global risks are mounting, so strong leadership, co-ordination and implementation of our economic strategy are essential at this time. The economy must not be allowed to drift, political problems must be resolved and policy makers should return to the job of creating an economy which offers opportunities and a better quality of life for everyone in Northern Ireland.”