The local economic outlook is for a sustained recovery, with growth expected to increase by 2.2 per cent in the year ahead, according to the latest report from Danske Bank.
The Quarterly Sectoral Forecast report, published today by Danske Bank, has marginally revised economic growth up to 2.2 per cent from 2.1 per cent for both 2015 and 2016.
The report notes that the Northern Ireland recovery is now well established with the creation of almost 20,000 jobs last year. Strong employment growth has been accompanied by a sustained reduction in unemployment, with the number of claimants falling for the 26th consecutive month during February 2015. The low rate of inflation is also set to provide a boost to local demand and expenditure levels and business surveys suggest that corporate confidence remains strong.
Ms McGowan noted: “The wider economic environment continues to improve and faster growth in household incomes this year will drive up expenditure and confidence. In particular we expect to see a rebound in business confidence as private demand gets stronger and uncertainty falls back. Surveys suggest that investment intentions are consistent with moderate growth. The strong pound is however the biggest hindrance to the economy this year and could impact upon manufacturing sales and our tourist trade.”
Best performing sectors
The highest growth sectors in the year ahead include: Professional and Scientific Services (6.4 per cent); ICT (6.1 per cent); Private Administration & Support Services (5 per cent); and Wholesale and Retail (4.3 per cent). Both the Transport & Storage sector and the Hospitality sector are expected to grow by 4.2 per cent. Together these six high growth sectors account for nearly one third of the local economy and forecasts suggest they will contribute to the creation of around 6,000 jobs this year.
Moderate growth sectors
Healthy growth is still expected for the local manufacturing sector which is forecast to grow at 3.4 per cent. However the report notes that growth in this sector is not expected to deliver new jobs in the year ahead. Rather, growth will be most probably be achieved by moving up the value-added chain and investing more in technology rather than staff. This sector accounts for nearly 14 per cent of the local economy but it is anticipated that manufacturing exporters will feel pressure from the weaker euro this year as around 16 per cent of local manufacturing sales have in recent years been going into the euro area.
Other moderate growth sectors include Construction (1.1 per cent) and Real Estate (1.4 per cent) both of which should benefit from a further rise in local house prices. Danske Bank forecasts that local house prices will rise by around 5 per cent this year. Finally, the Health sector is forecast to grow by 1.3 per cent.
Shrinking sectors
This year Danske Bank expects Public Administration and the Education sector to shrink by 1 per cent and 0.2 per cent respectively. In addition, the Agricultural Sector has been experiencing significant turbulence from shrinking global commodity prices and the low euro adding to its burden. So following several years of growth Danske Bank forecasts that the local agri sector will shrink by 0.5 per cent in 2015 before returning to growth in 2016. Ms McGowan noted: “With these sectors together accounting for nearly 20 per cent of the local economy, small contractions are nonetheless significant.”
Conclusion
Ms McGowan concluded: “Northern Ireland’s economy continues to perform well on a number of fronts. In particular the labour market is improving, house prices have recovered, credit is flowing again and real incomes are rising. There are many tailwinds pushing us in the right direction such as low inflation and rising confidence, but a significant headwind in the form of the strong pound will also place downward pressure on a number of sectors.”
