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Coronavirus hit to Northern Ireland economy will be worse than last recession, experts predict

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Belfast's deserted Oxford Street from the air on Monday March 30th. Picture By: Arthur Allison/Pacemaker.

Belfast's deserted Oxford Street from the air on Monday March 30th. Picture By: Arthur Allison/Pacemaker.

Belfast's deserted Oxford Street from the air on Monday March 30th. Picture By: Arthur Allison/Pacemaker.

Northern Ireland's economy could shrink by nearly 10% this year with 235,000 workers likely to be temporarily laid off by the end of the year, according to research published today.

The Ulster University Economic Policy Centre has estimated the economic impact of a lockdown continuing until June.

At 9.6%, the rate of downturn would be harsher than the lowest point of the last recession, with Northern Ireland's economy likely to take longer to recover than the UK as a whole. A fall in consumption of 8.1% - as we can no longer spend money to the same extent as we are confined to our homes - accounts for most of the slump.

And it said that lay-offs of 235,000 would account for 44% of private sector jobs.

Director Gareth Hetherington said the economy was facing unique circumstances which had made the rate of downturn steeper. And he said that the longer the lockdown continues, the more pessimistic research about its impact becomes.

Mr Hetherington said: "The current situation is unique in economic history. We have dealt with wars, recessions, financial crises and pandemics before and through painful experience developed policy responses for each of these, but never before have governments collectively told their populations to stay at home and in doing so, shut down a significant proportion of global economic capacity."

According to a survey by the NI Chamber of Commerce this week, around 36% of firms have temporarily shut.

Mr Hetherington said that in accepting there was a need to preserve public health by imposing a lockdown, there was also an acceptance that some damage to the economy would be a by-product of that.

But he added: "The unenviable decision facing political leaders will be when to shift the balance of that trade-off.

"Funding for public services requires a strong and wealthy economy generating tax revenues. However, a global economy on its knees will not be able to create the jobs to fund the level of investment society would wish to see. The timing of that decision will be very difficult and highly contentious," he said.

Between 2008/09, the economy contracted by 7.2%, with the forecasted fall of 9.6% this year significantly steeper.

The centre said that around 235,000 staff were likely to be placed on furlough or temporarily laid off. Furloughed staff are to benefit from a government scheme which will refund companies 80% of monthly wages up to a maximum of £2,500 per month.

Mr Hethertingon said the government's actions to protect incomes and business against the impact of the shutdown were unprecedented.

The rate at which the economy recovers depended on factors including how long the restrictions remain, "the extent to which consumers and businesses return to previous spending and investment levels and the policy measures implemented by governments".

He said that even when the crisis is over, firms were unlikely to spend at their pre-crisis levels - which he said could mean government steps in by fast-tracking investment plans.

Firms could also move to bring their supply chains closer, giving rise to an opportunity for Northern Ireland to reposition itself as a safer location for Great Britain and European inward investment, Mr Hetherington said.

According to the economic policy centre, 33,000 lay-offs or furloughed jobs have been in production and manufacturing, 25,000 in construction and 187,000 in private sector services.

Belfast Telegraph