Northern Ireland lagging behind in economy forecast
Published 08/03/2013 | 04:20
The Northern Ireland economy will grow by only 0.5% in 2013 and is still lagging behind the rest of the UK, according to business advisor's PwC.
The estimate from Belfast-based economist Esmond Birney comes on the day the Bank of England set fears of a triple-dip recession to one side and refrained from pumping billions of pounds into the UK economy.
The bank's decision leaves its quantitative easing (QE) money-printing programme unchanged at £375bn four years after the monetary policy committee embarked on quantitative easing.
Interest rates, held again yesterday at 0.5%, have also been lodged at their present record low since March 2009.
Mr Birney said worries that further QE could push inflation higher may have prompted the central bank of sit on its hands.
"With inflation still stubbornly above the bank's target of 2%, fears that further QE could push it even higher may have won the day," he said.
"Whilst the consensus is that the UK economy should grow in 2013 by about 1%, significant risks remain, with the British Chambers of Commerce already having revised down their growth forecasts for this year and 2014."
And he said that the Northern Ireland economy is still struggling to keep up with the rest of the UK.
"A forecast growth of around 1% for the UK means most regions outside London and the south east can expect growth below this figure. Most indicators suggest NI is still lagging well behind the UK average and, on current performance, we might expect around 0.5% growth for Northern Ireland in 2013."
The Monetary Policy Committee vote is likely to have been a nail-biter after three of its nine members, including Governor Sir Mervyn King, voted to inject another £25bn into the economy in February. Despite a buoyant start to the year for stock markets on both sides of the Atlantic – and inflation well above the Bank's 2% target at 2.7% – the economy has been in reverse for four of the past five quarters after shrinking another 0.3% between October and December.
Output remains 3% below its pre-recession peak almost five years ago.
More timely industry surveys meanwhile suggest that the economy is on course to grow a meagre 0.1% in the present quarter – missing the dreaded triple-dip by only the narrowest of margins.
Although the UK's dominant services firms enjoyed a better February, inconclusive elections in Italy have raised the spectre of a new phase in Europe's debt woes. And automatic spending cuts in America threaten prospects for the world's biggest economy this year.
The MPC's decision comes as Threadneedle Street – expected to shoulder the burden of reviving the economy as Chancellor George Osborne sticks to deficit-cutting plans – looks increasingly desperately for ways to spur growth.