Belfast Telegraph

'Italian-like stagnation' the risk if Northern Ireland political deadlock isn't broken

By John Mulgrew

Businesses can continue to prosper and grow despite political instability but a long-term failure could lead to economic stagnation here, an expert has said.

Economist Dr Esmond Birnie of Ulster University said there was a mixed picture when it comes to the impact of political instability on the economy.

"The 1950s to 1960s, and the US more recently, suggests the business sector can prosper and grow in spite of political dysfunction or instability. That's the good news," he said.

"The bad news is that Italy over the last 17 years, for example, illustrates how far an economy can be held back when political institutions fail to deliver fundamental reform.

"The longer politics fails to work in Northern Ireland, the greater the likelihood we are heading for an Italian stagnation."

Dr Birnie said the lack of a devolved government was "considered far from ideal".

Northern Ireland's politicians are currently deadlocked over the restoration of power-sharing.

Dr Birnie is due to address delegates from Turkey and the Middle East in Belfast this week on the impact of political uncertainty on the economy here.

"We need to be extremely cautious - not only is every case study unique in some regards but there is always the danger of learning the wrong lessons," he said.

"In any case, the available evidence is unfavourable. Northern Ireland does not look like a model example of how to achieve prosperity in a deeply divided society.

"If anything, alas, we may become a textbook example of how not to manage the political economy of a divided society." He said that was because the political institutions were too complex and costly, "lock in" community division rather than promote greater flexibility, as well as encouraging wasteful behaviour, and also "give insufficient priority to improving the productive base of the economy and society".

His presentation highlights one pessimistic view that Northern Ireland could become similar to Italy, in which "economic growth has slowed towards zero and hence economic policy increasingly seems to be about squabbles over shares of a shrinking cake".

Meanwhile, a report has said Northern Ireland's economy is predicted to grow by just 0.9% next year.

A revised look at economic growth this year shows an expansion of just 1%, according to the latest Northern Ireland Economic Outlook from PwC.

The report says that while the province is set to receive a £1 billion boost following the DUP's deal to prop up the Conservative Government at Westminster, "it will not fundamentally alter the structural challenges that face any new Executive".

It adds that the absence of a restoration of devolution and an end to political deadlock here - which now looks set to run until the autumn - mean that the "strategies and policies essential to regenerate the economy over the medium to long-term remain elusive, with agri-food particularly at risk".

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