The Northern Ireland economy will contract this year but continues to show signs of resilience and will return to growth in 2024.
That is according to Danske Bank which is more confident for economic performance in the rest of this year, revising up an expected contraction to just 0.3% from 1% previously.
Its Northern Ireland Quarterly Sectoral Forecasts said the wider economy has weathered the challenges from high inflation and rising interest rates better than expected, with the labour market in particular putting in a robust performance.
The bank said the wholesale and retail trade sector will see the deepest contraction of 1.9% this year before returning to growth of 1% in 2024, while the accommodation & food services and arts, entertainment & recreation are also projected to see falls in output in 2023 of around 1.7%.
Countering those falls are expectations for increases in activity in the professional, scientific & technical services sector of around 1.9%, the administrative & support services sector by about 1.2% and the information & communication sector by around 1.0% in 2023.
While the resilient performance of the jobs market has impressed, Danske Bank said the rate of jobs growth will slow sharply this year.
It expects the annual average number of employee jobs will increase by about 0.2% in 2023 and by around 0.3% in 2024. The bank is also forecasting that the unemployment rate in Northern Ireland will average around 3.2% in 2023, before increasing to an annual average of about 3.5% in 2024.
“The UK and Northern Ireland economies are continuing to face challenges as we move through 2023,” Danske Bank’s Chief Economist, Conor Lambe, said. “High inflation is still squeezing household purchasing power, consumer confidence remains low and the monetary policy environment is considerably tighter.
“However, the economy has proved more resilient than previously expected and the labour market remains in a relatively robust position. We still expect annual economic output to fall this year in Northern Ireland and the wider UK but we have revised our forecasts upwards relative to our previous report.”
“Persistent inflation is still a risk to the economic outlook with inflation in the UK remaining near its multi-decade high. Although we think it has likely peaked, the rate of price rises is still expected to remain above its 2% target throughout this year. If inflation remains higher than forecast and declines more slowly than anticipated, it has the potential to constrain economic activity even further.”
