Belfast Telegraph

Ulster economy could slip back into recession

By Clare Weir

Northern Ireland could slide back into technical recession this year, according to a new survey from Northern Bank.

The economic output here will remain largely flat in 2012, but a small contraction in the first quarter cannot be ruled out, according to the latest 'Quarterly Sectoral Forecast'.

However, Northern Bank chief economist Angela McGowan has said that any contraction in the first quarter of 2012 would be very small (-0.3%) and should not extend into quarter two.

The report predicts that the Northern Ireland economy will only grow by 0.3% this year and 1.8% for 2013.

The report notes the UK contraction in the last three months of 2011 has increased the chances of a small contraction locally.

At the end of last year, both Great Britain and Northern Ireland were both hit by a combination of austerity measures and uncertainty surrounding the European debt crisis.

However, the document has said that some indicators have shown significant improvement in the month of January despite global financial gloom.

The latest report said that while no sector will experience growth above 2% over the year, sectors which have an international focus - such as manufacturing, science and technology, ICT, agriculture and tourism - will fare best.

Ms McGowan said that the largest threat to the economic environment is still the ongoing eurozone crisis and its potential to negatively impact financial markets and investor confidence.

"There is no doubt the impact of such a scenario would be felt locally and would impact all local sectors," she said.

"That said, there are also positive influences that are working to support the economy.

"These range from the general improvement in global economic conditions that we have seen since the start of the year and improvements closer to home in terms of falling inflation and improved consumer confidence.

"Our manufacturing exports will be affected by the European slowdown in the early part of this year and this, along with a less competitive exchange rate, will have an impact. Until European problems are resolved we expect to see the euro stay close to its current relatively weak position.

"Local companies will be forced to regain some competitiveness in European markets through other means, such as increasing productivity, reducing their cost base and innovating."