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Danske Bank's economic forecast gloomy in wake of strong pound and tough markets

By John Mulgrew

Published 15/01/2016

Angela McGowan forecasts a a continuing recovery for the Northern Ireland economy in 2016 - but not overly exciting
Angela McGowan forecasts a a continuing recovery for the Northern Ireland economy in 2016 - but not overly exciting

Economic forecasts for Northern Ireland's economy this year are becoming increasingly gloomy - blamed on a strong pound, competition and tough global markets.

Danske Bank's growth forecast - which remains one of the most optimistic - has been revised down to 1.8% for the year.

But six months ago Danske had forecast the economy would expand by as much as 2.3% this year.

There are also concerns from Danske Bank that "one of the biggest risks to the local economy is the upcoming EU in/out referendum which has the potential to drag down investment levels".

It says while Northern Ireland's economic recovery "is expected to continue steadily in 2016" with growth underpinned by private services sector and a some new jobs, the rate of growth "has been revised down marginally from previous forecasts with ongoing austerity expected to dampen the domestic economy".

Danske Bank also says Northern Ireland could be in for growth of around 2.1% in 2017.

But it's IT, support services and science roles which will experience the largest growth this year - averaging around 4%.

Manufacturing is predicted to grow by around 1.9% this year. But according to Danske Bank, the strong pound and weak euro will "make the local manufacturing sector less competitive when selling into Europe".

And on growth overall, PwC is also forecasting an even less rosy picture for Northern Ireland's economy this year.

According to the Danske Bank report, public sector job losses feature heavily in the employment outlook for 2016, while spending is expected to be more measured.

"The Northern Ireland economy should continue with its recovery in 2016, however the pace of growth will not be overly exciting," Angela McGowan, Danske Bank's chief economist said.

"Although the annual growth rate is expected to be around 1.8%, there are, as always, a small number of sectors that will grow at an 'above average' rate and, of course, the public sector will continue to shrink."

Meanwhile, the local construction sector is continuing to recover and due to grow by 1.6% this year. That predicted growth is said to be due to an improving housing market, while the industry will benefit from a boost in "capital spend on public infrastructure".

Meanwhile, a report published by the Executive last week forecasts Northern Ireland's economy will grow by just 1.5% this year. And this week, a survey by the Northern Ireland Chamber of Commerce and Industry showed one in six firms fear that they will contract in size during the coming year.

Esmond Birnie, chief economist with PwC, said the business had revised its own economic predictions downward, to 1.4% growth in 2016. "It's a small, further education. The main thing is the trade impact, particularly relating to high sterling against the euro," he said.

"In terms of selling into continental Europe and southern Ireland, manufacturing, tourism and services have been hit by that.

"Competitiveness is also an issue and just the general difficulties in global trade."

Ms McGowan said there remains a "dire need for the private side of the economy to expand output, raise revenue streams and create jobs".

"Hopefully the macro economy will not present too many surprises for our business sector in the year ahead as economic stability is conducive to investment.

"However, there are some uncertainties on the horizon which cannot be ignored, including Brexit and the impact of low oil on emerging markets."

Belfast Telegraph

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