Republic of Ireland economy set to accelerate further ahead of Northern Ireland
The increasingly faster expansion of the economy in the Republic - three times that of Northern Ireland - could advance further amid predictions of slow job creation here over the next two years, new research has shown.
EY's Economic Eye is forecasting 4.9% growth in the Republic this year, compared with just 1.4% in Northern Ireland. And the economy here is also predicted to see GDP growth of just 1.1% in 2018.
The jobs market is also predicted to expand at a much slower level in Northern Ireland, with just 5,800 new posts created here by 2020.
Neil Gibson, chief economist with EY in Ireland, said the real concern for Northern Ireland is an increased pressure on consumers and their incomes. "The real story is if we are looking at pay rises either side of 2% across the island, that's a pay cut in Northern Ireland but a rise in the Republic.
"For us in Northern Ireland, consumers had it good in 2015/16, but it will be tough in 2017 and heading into 2018.
"Tourism and cross-border shopping helps Northern Ireland, because we are doing well in tourism and getting good cross-border flow from the Republic.
"It could be more challenging without those factors.
"Retail is a sector of great importance. It employs about a quarter of the Northern Ireland workforce.
"We are now saying that we need to ask about differences in tax. If we are going to keep streets vibrant, we may need new ways of taxing.
"Thinking about whether funding around bricks and mortar-type income is the way to go, or more from the consumption.
"However, rates is a big thing as a revenue raiser. But modernising the tax system - regionally we may have our own nuances around that."
And the divergence in growth is "important" as it could become even greater, as GDP in Northern Ireland is predicted to slow to just 1.1% next year.
"People will feel the jobs market, which we think will be pretty flat in Northern Ireland," he continued.
The research also shows that shoppers from the Republic spent around £368m in Northern Ireland in the last year.
"Higher dependence on consumer and government spending in Northern Ireland, and very different inflation levels, are creating divergence in spending power between the north and south, which is contributing to a weaker NI outlook," Mr Gibson said.
Michael Hall, managing partner, Belfast, EY Ireland, said "the retail and consumer sector appears to face a profoundly challenging time in Northern Ireland". "As well as traditional cross-border shopping, tourism between Northern Ireland, the Republic and the UK is also a critical economic consideration," he commented.
However, Northern Ireland is benefiting from cross-border trade with the Republic due to the weak pound as a result of uncertainty over Brexit.
"The impact of Irish consumer spending in the north will contribute to closing the retail performance gap slightly between the two economies," Mr Gibson said.
"Given strong consumer growth, cross-border shopping does not appear to be having a significant overall impact on retail businesses in the Republic.
"The consumer and retail sector is one of the largest providers of employment for all ages and skill levels across the island," he added.