Public service cuts stifling Northern Ireland's future growth, says think tank
Northern Ireland's economy will grow by nearly 2% in 2015 but could later suffer a two-year slump thanks to austerity measures, a think tank has said.
The economy here is forecast to expand by 1.9% in 2015, according to the Ulster University Economic Policy Centre (UUEPC).
But growth is set to slow in the following years, falling to 1.1% in 2016 and further still to 1% in 2017.
The mixed forecast was revealed as First Trust Bank unveiled its new £50m business growth fund, aimed at helping small and medium sized firms.
Meanwhile, forecast figures could be further revised down slightly thanks to the Northern Ireland welfare reforms stalemate.
But on the other hand, the figures could be revised upwards, if corporation tax and a final budget are agreed on, according to UUEPC associate director Gareth Hetherington.
But it's the imminent public service cuts which will have the greatest impact here.
"There are several key drivers of economic growth - we are going to see an increase in interest rates in 2016 and then there's the next wave of austerity," he said.
"In regards to the specific impact of welfare, we have to remember, it's where the money gets spent.
"If we don't implement welfare, we may have to do it on our own, and that could take money away from frontline services."
Growth in Northern Ireland is also being bolstered by manufacturing, which has outpaced expansion elsewhere in the UK.
Meanwhile, the construction sector industry is predicted to experience moderate growth of 1.9% this year. But that is expected to slow in the coming three years. And the report from the Ulster University Economic Policy Centre says "austerity will be the new normal for most of the rest of this decade".
Employment growth levels are predicted to be modest this year, sitting at 0.7%. But that's tipped to shrink by 0.2% by 2018.
Mr Hetherington said employment growth in manufacturing had outstripped other parts of the UK. "Our analysis suggests that since 2012 local manufacturers have created 4,700 more jobs than would have occurred if the sector had grown at average UK rates."
Mr Hetherington said devolution of corporation tax was key, with uncertainty continuing to put big firms off from setting up shop here.
"The lower growth is driven by levels of austerity. But if we get a deal on welfare and corporation tax, you might see small revisions upwards," he added.
Richard Ennis, director of business and corporate banking at First Trust Bank said if Northern Ireland wants to grow in the next few years "we need expansion within the private sector to counteract the negative impact of continued public sector austerity".
"The good news is that we are seeing a return in confidence among our customers, many of whom are now in a position where they want to grow.
"It is for this very reason that we have brought forward a new £50m business growth fund to support those businesses who wish to borrow in excess of £150,000 to expand and invest."