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NI coronavirus economic hit will be staggering, says bank

Recovery could take three years, warns Danske Bank

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A recovery in the labour market is expected in 2021.

A recovery in the labour market is expected in 2021.

Photo by Kelvin Boyes / Press E

Impact: Conor Lambe

Impact: Conor Lambe

A recovery in the labour market is expected in 2021.

Northern Ireland's economy is set to shrink by a "staggering" 7.5% with the unemployment rate doubling to 5%, according to a forecast today.

The Northern Ireland Quarterly Sectoral Forecasts report by Danske Bank said hospitality would be the worst-hit sector, with a contraction of 17%.

Recreation and entertainment would follow closely - shrinking by 16.8%, while manufacturing would suffer contraction of 12%.

The survey also forecasts growth of 5% in 2021 but added that the economy is not likely to reach pre-coronavirus activity until 2022 or 2023.

The forecasts are based on the assumption that the current lockdown remains in place until somewhere between the end of May and the middle of June before gradually being lifted, with some social distancing measures expected to remain in place for a longer period of time.

It attributed social restrictions to the decline, as lack of freedom of movement puts a dent in consumer spend. Investment is also set to drop as firms contend with cashflow and revenue challenges.

The report said it expected unemployment to sit at 5% at the end of lockdown, which is 2.5% more than the latest figures in the Labour Force survey for December 2019 until February of this year.

However, the forecast said that policy measures, such as the Coronavirus Job Retention Scheme, should help to limit the number of job losses.

Danske Bank expects the number of employee jobs here to decline by around 2.3% in 2020.

But the forecast also warns that the unemployment rate would reach higher levels than 5% in the second and third quarters of this year.

The bank does expect to see some recovery in the labour market in 2021 with the number of jobs rising by 1.2% and unemployment coming down to about 4.5%.

All areas of decline are expected to be limited to the first two quarters of 2020, with activity beginning to recover gradually in the second half of this year and into next year.

Danske Bank chief economist Conor Lambe said: “Unfortunately it seems clear that we will experience a staggering decline in economic activity in Northern Ireland this year due to the impact of the coronavirus pandemic on consumer spending and business investment.

“However, once the lockdown measures begin to be gradually lifted we should see the beginning of a recovery, with the range of recently announced government policy measures supporting the economy to get moving again.

“It is important to say that, despite the expected return to positive annual growth rates from 2021, total economic output may not return to its pre-coronavirus level until late in 2022 or into 2023. In addition, these forecasts are provided in a climate of extremely high uncertainty and the risks around our numbers are weighted to the downside.”

Looking at individual sectors the report said the accommodation and food industry (-17.0%), arts, entertainment and recreation (-16.8%) and education (-14.2%) would bear the brunt of lockdown measures.

The wholesale and retail trade sector will experience an annual fall in output of 8.5% in 2020. Both manufacturing and construction are also expected to experience sharp declines in output, with falls of around 12.0% and 7.7% in 2020 respectively.

The report added that extensive shutdowns and falls in orders are impacting both sectors. And, given the global nature of this pandemic, future supply chain issues may impact their recovery.

Belfast Telegraph