The recession is here and will hit us harder than rest of UK, warns expert
Published 04/11/2008 | 00:01
Northern Ireland’s economy has now slipped into recession and the situation is set to get worse, a leading local economist warned today.
Richard Ramsey, the Ulster Bank’s Northern Ireland economist, has become the first of the local experts to say for definite that the recession has arrived.
Until now, the general consensus was that Northern Ireland’s large public sector would insulate the economy against negative growth.
But Mr Ramsey said his calculation was that Northern Ireland was already in recession and would record zero growth for 2008 as a whole.
Looking ahead, he said he was predicting that the province’s economy would contract by 1.5% next year.
He also said that the impact of the recession would be more severe on Northern Ireland than the rest of the UK.
Previously, Mr Ramsey had forecast that growth in Northern Ireland would remain positive at 1% or less this year, but he said he had now revised his forecast in light of the global picture which had deteriorated sharply since the last report.
He said his view that Northern Ireland was now in recession was based on the fact that private sector output had contracted for the past four quarters.
The warning, contained in the Ulster Bank’s quarterly economic review, means that Northern Ireland has followed Britain and the Republic into negative growth.
He said the extent of the public sector would not insulate the province from recession, and warned that the slowdown was affecting all sectors.
“With a large exposure to the retail and construction sectors, combined with a significant slowdown in public expenditure, Northern Ireland will fare worse during the current downturn than the UK economy as a whole,” he said.
“This in contrast to the early 1990s when Northern Ireland escaped the UK recession because of significantly higher levels of public expenditure and continuous employment growth.”
Mr Ramsey predicted that unemployment in Northern Ireland — currently 4.3% — will soar to more than 6% next year as the recession hits the key retail and business services sectors.
He said that last time round, in the 1991 recession, Northern Ireland managed to record growth of 1.4%.
This time, he said, the public sector — which employs 30% of workers here compared to 20% in the UK as a whole — would provide some protection but would not prevent the economy sliding into negative growth.
“Due to its exposure to the housing market downturn and to consumer sensitive sectors such as retail, Northern Ireland will not escape recession and will actually fare worse than the UK as a whole, with zero growth being recorded in 2008 and negative growth of minus 1.5% in 2009.
“This compares to 0.8 per cent growth in 2008 for the UK as a whole and a contraction of 1% in 2009.
“Indeed it is our view that the local economy is already in recession with private sector output having contracted for the past four quarters.”