A ‘fragile’ economic recovery predicted
Published 01/12/2009 | 11:31
Northern Ireland’s economy will lag the national recovery by as much as four months, First Trust Bank’s latest economic and business review has predicted.
Writing in the quarterly report, Mike Smyth, head of the University of Ulster’s school of economics, said that while the province is through the worst of the downturn the recovery will be fragile in the months ahead, leading to a “wary Christmas and bumpy new year”.
The report reiterates earlier predictions and echoes the views of some other local experts.
Mr Smyth tips the Northern Ireland economy to experience a 2.5% contraction in gross domestic product during 2009, before a recovery of 0.5% in 2010.
That compares with forecast for the UK economy to contract by up to 4.7% this year before growth of below 1% next year.
“We can expect recovery to be patchy and slow in the early stages with further budgetary pressures likely in 2010 as a national spending restraint begins,” he said.
“With public expenditure due to be very tight in 2010 and 2011, this will give rise to some tough choices for the NI Executive.
“For example, hitherto protected sectors such as health and education will no longer be immune from reductions in the Barnett formula consequentials imposed by London.
“There is also a likelihood that some of the planned capital programmes may be under threat as the pressure to cut spending intensifies.”
On a positive note the report forecasts the cross-border shopping boom will continue well into 2010 despite VAT going back up to 17.5% at the end of the year.
And First Trust also said that while unemployment may edge upwards towards 60,000 in the first half of 2010, it will fall again when economic recovery becomes established.
Mr Smyth also welcomed news that the province’s decline in manufacturing output and productivity growth slowed in the second quarter of this year and that the services sector and house prices had both increased.
First Trust’s Philip Major, said the bank remained cautious about “overstating matters” and that local policymakers were facing some “crucial decisions”.