Economy stagnates as conditions deteriorate
The Northern Ireland economy is stagnating as firms face increasingly tough conditions, a report said today.
Northern Bank's quarterly sectoral forecast said it had revised its forecast for the economy from 0.3% to 0.1% for the year.
The bank said our economy is now at the same point it was 18 months ago, partly thanks to a challenging period for the global economy from April to June.
A deteriorating UK economy, low levels of demand and a stronger pound relative to the weakening euro, all added up to increasingly difficult trading conditions for Northern Ireland firms.
Northern Bank said the health of the economy in the near future would be determined by factors such as inflation, consumer confidence and the exchange rate - but that the most significant influence will be Europe and its impact on the global economy.
Northern Bank chief economist, Angela McGowan, said: "The European debt crisis will continue to act as a drag on growth until policymakers implement long-term stability measures.
"But the impact on Northern Ireland of a European downturn will be less severe than that experienced in England, Scotland or Wales. This is simply because Northern Ireland's private sector is small and its export base is limited.
"Nevertheless, Europe remains the biggest market outside Great Britain for the few local exporters that Northern Ireland has. Conditions for growing our private sector and attaining that export-led recovery are far from ideal."
Economic growth forecasts for 2012, in both agriculture and manufacturing, which were the first sectors to bounce back after the initial downturn in 2008, have been adjusted down by Northern Bank to 1.8% and 0.9% respectively.
But growth is forecast to be relatively strong in the ICT sector at 2.6%, with the report noting there is potential for significantly higher growth in this sector in the years ahead.
The arts, entertainment and recreation sector and the hospitality sector are expected to grow at 2.2% and 1.1% respectively, as they reap the rewards from recent investment in Northern Ireland's tourist and cultural offering.
The sectors facing negative or zero growth are construction, the financial sector and public services, with growth in the retail sector also predicted to remain fairly low this year at 0.2%.
Ms McGowan added: "Although conditions are difficult, significant export opportunities still exist in emerging markets."
Last month the Ernst & Young Economic Eye Summer Forecast said the Northern Ireland economy will barely grow this year and downgraded the growth in our GVA (gross value added) from 1.1% to 0.1% in 2012, 1.0% in 2013 and 2.1% in 2014.