EY increases Northern Ireland growth forecast but warns of slowdown in labour market
Professional services group EY has raised its projection for the growth of the Northern Ireland economy for 2019 from 0.9% to 1.1%.
The latest EY Economic Eye report published today, said that if a smooth Brexit scenario can be secured, the economy here will grow by 1.2% next year and then 1.6% into 2021 and 2022.
EY has downgraded its overall UK growth forecast for 2019 to 1.3% due to Brexit effects on investment and problems with in the car industry. The all-island report projects GDP growth in the Republic of Ireland will reach 4.1%, moderating to 3.3% in 2020.
Northern Ireland's labour market, which has expanded in each of the last six years, is projected to slow in 2019 and contract slightly the following year, before returning to moderate gains in 2021.
Weak growth combined with a very tight labour market, rising business costs and challenging high street conditions are the main factors in the projected slowing of the labour market.
Neil Gibson (right), chief economist for EY Ireland, said: "Whilst our forecast projects a slowdown in the rate of job creation in the Northern Ireland labour market, it's important to note that this trend has also been expected in previous Economic Eye reports and has not materialised, as the region has continued to outperform expectations.
"Despite disappointing growth levels firms continue to hire, placing a premium on talent."
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According to EY, the sectors set to experience the most significant employment growth between 2018-2023 are ICT (5,400), professional services (3,400), accommodation and food (2,900) and construction (2,900), while the sectors set to experience losses include the wholesale and retail (-3,200), agriculture (-1,800) and public administration (-1,600).
Assessing the likely impact of a 'bad' Brexit on the economies on both sides of the border, EY's report said it expects the Irish economy to avoid outright recession, even with tariffs.
Recent research by the business services group found a 52% increase in foreign direct investment into the Republic in 2018, with a major acceleration from the UK. As such, EY said a global economic slowdown presents a much greater threat to the Republic's headline GDP growth than Brexit.
The same report showed Northern Ireland was the only part of the UK to record an increase in FDI projects, with all other UK regions suffering a contraction. The growth was largely driven by increased numbers of projects from the US and the Republic.
EY said it emphasises the talent cost proposition in the region remains compelling despite the prevailing Brexit uncertainty.
However, the report also said with weaker growth in Northern Ireland meant a 'bad' Brexit scenario would likely push the economy here into recession.
Michael Hall, head of markets for EY Ireland, said: "The strength of the Irish economy suggests that even a hard Brexit may not push the country into recession, though it would clearly be very difficult for particular sectors and regions.
"The same cannot be said in Northern Ireland where the underlying economic performance is much weaker.
"However, the impressive FDI figures into the island, highlight the opportunities that exist among the very obvious risks.
"Coupled with the fact that most people across the island who want a job have one, this provides a strong platform from which to face the challenges that lie ahead."