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Republic's economy may boost Northern Ireland as UK growth stagnates

By Margaret Canning and Sarah Collins

Published 05/02/2016

The Governor of the Bank of England, Mark Carney, spoke during the quarterly Inflation Report press conference yesterday
The Governor of the Bank of England, Mark Carney, spoke during the quarterly Inflation Report press conference yesterday

Northern Ireland's economy could do well out of the contrasting fortunes of its neighbours as the Republic soars while the UK's wings are clipped, it's been claimed.

Great Britain is Northern Ireland's main trading partner, with sales of £8bn, followed by the Republic as our main export partner, accounting for sales of £1.4bn.

But a speech by Bank of England governor Mark Carney yesterday gave a downbeat assessment of UK prospects - while the Republic was being tipped to enjoy the fastest growth of any EU country during 2016.

Mark Carney said the UK was being buffeted by "unforgiving" conditions in the global economy as latest forecasts slashed Britain's growth outlook.

Mr Carney admitted UK economic growth was weaker than the bank forecast three months ago as policymakers kept interest rates on hold once more at 0.5%.

But as the UK's growth outlook was slashed, the Republic was on the up.

Pierre Moscovici, the EU commissioner for economic affairs and tax, predicted that Ireland's economy would expand by 4.5% this year, more than twice the EU average.

The strong performance is based on increased consumer spending and a boost in investment, while net exports - the difference between exports and imports - contracted last year and will remain close to zero next year, the EU predicts.

GDP growth was 6.9% in 2015, the commission said, an upward revision of almost an entire percentage point on its November forecast. However, growth will slow to 3.5% in 2017, with Luxembourg and Romania overtaking Ireland as the fastest-growing economies in the bloc.

In contrast, the Bank of England cut its forecast for the next three years, from 2.5% to 2.2% for this year, and 2.4% from 2.7% for 2017. And for 2018, it predicts growth of 2.5%, down from 2.6%.

But Northern Ireland is likely to continue under-performing, with a growth rate of 1.4% during 2016 forecast by PwC.

However, economist Andrew Webb, managing director of Webb Advisory, said Northern Ireland could do well out of both the Republic's fortune and the UK's misfortune.

"As our two main trading partners, strong Great Britain and Ireland markets are essential for our exporters. We also enjoyed a significant cross-border retail boost when the south was enjoying strong economic growth and we had a favourable exchange rate so perhaps a return to strong growth in the south could boost Northern Ireland border towns."

And with the Northern Ireland economy still reliant on the public sector, it was less exposed to global and neighbouring growth rates, he said - but more exposed to public spending decisions at Westminster.

He added: "For consumers with mortgages, there is an argument that economic data coming from the UK which points to a slow-down in growth and therefore a delay in interest rate rises is a good outcome."

Mark Carney said it was "more likely than not" that rates will need to rise over the next two years, but the bank's latest quarterly report signalled a hike will now not come until the final quarter of 2017.

All nine members of the Monetary Policy Committee (MPC) voted to keep rates on hold, as they have been since March 2009, in what marked the first unanimous vote since last July.

Mr Carney said: "As one of the most open economies in the world, the UK cannot help but be affected by an unforgiving global environment and sustained financial market turbulence."

But he said the prospect was for "continued solid expansion", albeit a bit weaker than previous years.

4.5%

What the Republic's economy is expected to expand by in 2016

1.4%

What NI's economy is expected to expand by this year

Belfast Telegraph

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