Northern Ireland's economy on rise 'despite public sector cutbacks'
Northern Ireland's economy will expand by around 2% this year despite "tough" public sector cuts, a report said today.
Ernst and Young's forecast for growth in the province rose to 2% in 2015 - up from 1.7% in its winter predictions - but added "a tough period of austerity lies ahead for Northern Ireland's public-sector dependent economy".
The figure is lower than the advisory firm's outlook for the Republic of Ireland's economy, which it believes will grow by 3.7% this year.
After 2015, EY said Northern Ireland would see a prolonged period of low growth, with expansion of around 2% each year between 2016 and 2020.
EY expects Northern Ireland to create 6,000 net jobs in 2015 - half the 12,000 jobs created last year. The lower figure was due to cuts to the public sector and Invest NI's big success in attracting foreign direct investment (FDI) during 2014.
In 2014-15, only London attracted more FDI than Belfast.
EY's economic growth forecast comes after Finance Minister Arlene Foster warned the Executive is likely to miss the April 2017 target date for a lower rate of corporation tax - meaning one of the major levers for economic improvement could be off the table.
Graeme Harrison, economic advisor to EY's Economic Eye, said: "Economic growth in Northern Ireland in 2014 was relatively strong, as it was in the Republic of Ireland and UK, but maintaining this momentum will be difficult given the risks presented by the forthcoming austerity ramp-up in the UK, the strength of sterling versus the euro and changes in EU State Aid rules that will make it difficult to repeat the recent record FDI performance.
"However, improving conditions for consumers are forecast, as wage levels are set to outstrip the current low rate of inflation and more people find work. This will also help to support expansion in domestic focused sectors which have also begun to exhibit job growth."
Michael Hall, managing partner for EY Northern Ireland, said the Executive must deal with the uncertainty surrounding welfare reform. But yesterday Sinn Fein Deputy First Minister Martin McGuinness said it would give "conditional support" to the Finance Minister's new budget bill.
EY said Northern Ireland's exporters have been affected by the strengthening pound and weakening euro. The province's exports fell by 1% in 2014, while the Republic saw exports soar by 16%.
Mr Hall said: "Sterling's fall against the dollar means Northern Ireland exports to the US have become more competitive there in recent months.
"With some emerging economies - in particular China - set for a managed slowdown in the coming years, it is important for Northern Irish exporters to continue to focus on traditional markets, in tandem with a managed expansion into new global markets."