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NI economy tipped to record 5% growth this year


Danske Bank’s Conor Lambe

Danske Bank’s Conor Lambe

Danske Bank’s Conor Lambe

The Northern Ireland economy should record growth of up to 5% and 6% for 2021 and 2022 respectively, economists have said.

Ulster Bank chief economist Richard Ramsey forecast an improvement in the economy after the NI Composite Economic Index (NICEI) reported a 1.4% fall in economic output between the third and fourth quarter of last year. In contrast, the close-to equivalent GDP in the UK had risen by 1.3%.

Mr Ramsey said separate indicators suggested a fall in economic output for early 2021, partly due to continued coronavirus restrictions, adding: "Both Brexit and Covid-19 are at play and it will be difficult to disentangle these effects in 2021.

"With lockdowns still in place throughout Q1 2021, it looks like it will be Q2 before the economy records growth again.

"Output is expected to be catapulted higher - led by private sector services - with a strong second half as lockdown restrictions are relaxed and the vaccine roll-out nears completion."

According to the NI Statistics & Research Agency, which produces the NICEI, the construction sector had annual growth of 10.3%, and 14.9% growth quarter on quarter.

However, output in the economy as a whole was down 2.8% compared to the last few months of 2019. The previous two quarters had seen 15.1% growth followed by a 13.3% fall - the highest then the lowest quarter on quarter growth in the series.

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Across the four quarters of 2020, compared to 2019, the economy had shrunk 6.3%, with the services sector the worst performing.

In the last decade, the UK has enjoyed GDP growth in 35 out of 40 quarters. But in Northern Ireland, where our economic performance is not as strong, there has been growth during just 19 quarters.

Danske Bank chief economist Conor Lambe forecast that the local economy will return to pre-pandemic levels in the second half of next year.

He said the roll-out of the vaccine would provide an economic boost from the second quarter of this year, with sectors hardest hit by lockdown - such as food and accommodation, and entertainment - expected to see the most rapid recovery. Mr Lambe predicted overall economic growth of 4.8% across 2021, accelerating to 5.8% in 2022.

However, the bank's quarterly sectoral forecasts report said the economy was likely to have shrunk over the first few months of this year due to coronavirus restrictions.

Recovery of the jobs market would be fragile, with a fall in employee jobs of 1,9% during the year. Measures such as the government's furlough scheme, which has preserved jobs affected by lockdown, would continue to play an important part in recovery.

But some deterioration was still expected in the labour market, with consumers likely to remain cautious about spending.