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Northern Ireland economy predicted to grow at faster rate than expected

By John Mulgrew

Northern Ireland's economy is predicted to grow by 1.2% this year but economists are warning that consumer spending power will be squeezed due to a rise in inflation.

Danske Bank has revised up its 2017 forecast for economic growth in Northern Ireland.

The bank had originally predicted the economy would grow by just 0.8% in 2017.

And it believes the economy will grow by 1% in 2018.

"There were a number of positive data releases for Northern Ireland which pointed to a very strong end to 2016," said Danske Bank economist Conor Lambe.

"Inflation has picked up in recent months and is likely to rise a bit further later in 2017 as the impact of the sharp depreciation of sterling continues to feed along the supply chain.

"We expect the average rate of CPI inflation in the UK to be around 2.8% in 2017 and 2.7% in 2018 and this will exert downward pressure on households' purchasing power.

"As such, we expect consumer spending growth in Northern Ireland to slow both this year and next."

The bank predicts the information and communication sector will see the largest expansion, rising by 4%, followed by the professional, scientific and technical sector, with 3.2% growth.

But there are a number of "risks and uncertainties" which could impact on the Northern Ireland economy and hinder its growth this year and next, Mr Lambe said.

That includes the ongoing political impasse at Stormont, and at Westminster, along with Brexit.

"Following the outcome of the UK general election, which resulted in a hung Parliament, political uncertainty is now at a more elevated level," Mr Lambe said.

"It remains to be seen whether the new government can bring about an increase in political stability, and indeed, what policy agenda it will pursue over the coming years."

"In Northern Ireland, the next key political milestone will be June 29 - the deadline for the local parties to establish a working Executive.

"A fully functioning Executive and Assembly, and the political stability that they can bring, are important factors that contribute to the performance of the Northern Ireland economy."

Elsewhere, hotels and restaurants are "set to experience relatively strong growth" of 2.9%, while wholesale and retail is predicted to see 2.2% growth in 2017.

Danske said its survey shows "consumer confidence at its highest level since the third quarter of 2015".

"However, growth is expected to slow in these sectors in 2018 as sustained high inflation eats into households' spending power," it said.

The outlook has said that on the back of recent labour market reports, "the employment forecast for 2017 has been revised upwards to 0.1%".

But Danske said the forecast for 2018 remains negative, with the number of jobs predicted to fall by around 0.2%.

But the bank added there was a "spike in construction activity in the final quarter of 2016 and we expect the sector to have taken some of this momentum into 2017".

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