The Northern Ireland economy appears to have pulled itself out of recession thanks to a storming performance by the services sector, according to latest government data.
The province’s largest sector – which accounts for any business which offers a service such technology, financial services, healthcare, hospitality etc – expanded by 1.8% last year and 1% in the last quarter, capping an impressive run which has left it some 6.2% above its pre-pandemic levels.
Given services make up more than half of the Northern Ireland economy, it is expected that the Northern Ireland Composite Economic Index (NICEI) – the overall measure of the economic performance – will reflect growth in the wider the economy when it is released at the end of March.
Following a contraction for the NICEI in the second and third quarters of 2022, Northern Ireland was in a technical recession but a positive result for the fourth quarter will see it return to growth mode, Richard Ramsey, Chief Economist at Ulster Bank said.
“The NICEI previously signalled the Northern Ireland economy was in a technical recession (two successive quarters of decline),” he said. “Following today’s releases - notably a strong rise in services activity of 1% quarter-on-quarter - it looks like the NI economy exited recession in the fourth quarter.”
Also helping the recovery is the retail sector which jumped 2.2% in the fourth sector, although other parts of the economy appear to be struggling.
The production sector, according to the Department of the Economy release, decreased by 0.6% during the same period, the third decrease in as many months and matching a similar move for the wider UK sector.
Nevertheless, a return to growth for the wider economy will boost sentiment as Northern Ireland attempts to ready itself for the expected benefits which are expected to flow should the Windsor Framework deal be passed.
The deal would give businesses in Northern Ireland the opportunity to trade across both the UK and European Union markets, a unique situation which has caught the eye of international investors. Bloomberg has reported that US firms are poised to pour billions of dollars into the province if the Windsor Framework deal leads to political stability in the region.
Much depends on the Democratic Unionist Party, one of the two main parties in Stormont, who are taking time to consider the deal. They have refused to form a government with Sinn Fein since last year’s elections over concerns around post-Brexit trading arrangements.
Should the deal be passed and the Executive be reformed, future iterations of the NICEI will be interesting, particularly if the mooted US investment does indeed flow into the province.
