Belfast Telegraph

Economy predicted to grow, but at the slowest rate among UK regions

By Clare Weir

Northern Ireland's economy is set to grow in 2014 but at the slowest growth rate of the 12 UK regions, according to a New Year forecast.

Business advisory firm PricewaterhouseCooper has set out its main predictions for 2014 and has said that the region's output will grow by 1.6% in the next 12 months and unemployment could fall to around 58,000 from around 61,000 currently.

The first issue of Global Economy Watch has also claimed that the UK will remain the fastest growing major European economy in the next 12 months.

UK GDP growth is expected to be in the range of 2-3% in 2014, with a main scenario of 2.4%. The level of UK GDP is projected to rise back above pre-recession levels in the final quarter of 2014.

PwC expects inflation to remain slightly above target, at 2.3% on average, the ninth successive year when inflation has been above its target rate, with the level of consumer prices in 2014 projected to be around one quarter higher than in 2005, when annual average inflation was last on target.

Real average earnings are expected to decline for the sixth consecutive year in 2014, although the gap between prices and earnings is expected to be the smallest since 2009, so the real wage squeeze will start to ease.

Continued real wage constraint will, however, support employment growth, pushing unemployment down to close to the Monetary Policy Committee's 7% threshold by the end of 2014. This is likely to restart the debate on monetary tightening, with a minority of MPC members expected to be voting for interest rate rises by late 2014 and the first actual rate rise expected during 2015.

The UK budget deficit is expected to fall below £100bn in 2014/15 for the first time since the recession.

In 2014 PwC said it expects annual average UK house prices to increase by around 4% over the year. While the third quarter of 2013 surpassed the previous average UK house price peak seen in the third quarter of 2007 in cash terms, once adjusted for CPI inflation the average UK real house price will be still over 10% below this peak at the end of 2014.

PwC has also projected that the GDP of all but one of the G7 economies will rise back above their 2007 levels, with Italy the only exception. By the end of 2014, PwC expects that 22 economies around the world will still be smaller than in 2007. Of these, nine will be in the Eurozone.

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