Export businesses will be able to tap into the global economic recovery and defy the economic gloom that is set to descend on the local economy, a report released today predicts.
However, unemployment in the province could push towards 8% by the end of the year — a level not seen since 1997.
Ulster Bank’s quarterly economic review said that while domestically-focused firms are likely to be hampered by the implications of dramatic public spending cuts, those trading in international markets will benefit from the coming upswing in global trade.
The bank’s chief economist, Richard Ramsey said there was increasing evidence that Northern Ireland will expand less this year than previously predicted, despite a visible improvement on the world stage.
“Over the last 12 months, economists have been raising their forecasts for global economic growth, with the US and Asia continuing to experience upward revisions.
“Conversely, the intensification of the European debt crisis has had consequences for growth prospects in the Eurozone and the UK, and Northern Ireland will be significantly impacted by austerity measures introduced to control the UK’s public finances. In this respect, we expect Northern Ireland public spending cuts totalling up to £1.5bn over the next four years,” he said.
The weakness of the local recovery means Northern Ireland will likely experience growth of less than 1% in 2010, and public spending cuts will hamper future prospects, according to Ramsey.
He tips growth of 1.5% in 2011 — much lower than the 2.7% outlook for UK growth, and a 3.5% rise forecast for the Republic.
The Ulster Bank report follows downbeat predictions from Northern Bank and Ernst & Young, which highlighted the pressures public spending cuts will place on the regional economy.
Northern Bank lowered its outlook to a 1% rise in Northern Ireland GDP this year, while Ernst & Young’s Economic Eye tipped 0.8% growth in 2010 and 2.2% in 2011.
Mr Ramsey predicted a two-speed manufacturing recovery, with firms reliant on the domestic and Irish markets struggling, while those exporting to the US and Asia prosper.
The economist also gave a particularly gloomy view of the jobs market in light of the impending cuts in public expenditure, forecasting the claimant count will rise to 62,500 from its current level of 55,400, an overall rate of 8%. This will require the Executive to revisit its economic strategy, he believes.
“The present economic strategy and Programme for Government are geared towards advancing the economy as it was in 2007. However, our economy has shrunk to 2004 levels, with some aspects of the labour market back to levels of a decade ago.
“Northern Ireland’s economic strategy needs to reflect this harsh reality, meaning that there may have to be a re-balancing away from the current emphasis on productivity over employment.
“It is now time for economics to take centre stage at Stormont, with the allocation of scarce resources in the most efficient and effective manner more important than ever before,” Mr Ramsey said.