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Coronavirus hit to NI economy by 2025 may be up to £2.7bn

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Evidence: Dr Esmond Birnie

Evidence: Dr Esmond Birnie

Kevin Scott / Belfast Telegraph

Evidence: Dr Esmond Birnie

Northern Ireland's economy could still be missing out on up to £2.7bn in five years' time due to the Covid-19 pandemic, an expert has warned.

Dr Esmond Birnie, senior economist at Ulster University's Business School, says that by 2025 UK GDP could be between 3% and 6% below where it would have been in the absence of the crisis.

That translates into an output loss of between £1.35bn and £2.7bn here.

Taking the higher figure, it means the average level of output per person in Northern Ireland would be around £1,420 lower than if Covid-19 had not struck.

The bleak assessment came as the Office for Budget Responsibility (OBR) yesterday warned the "UK is on track to record the largest decline in annual GDP for 300 years", warning that the economy could shrink by as much as 14.3% in 2020.

In its latest set of financial forecasts, the fiscal watchdog said a worst-case scenario would also not see GDP recover to pre-coronavirus crisis levels until the third quarter of 2024.

Government measures to address the impact of the virus will also result in an "unprecedented peacetime rise in borrowing" this year to between 13% and 21% of GDP, with the OBR currently predicting borrowing of £322bn.

UK GDP is set to fall by 10.6% in even its most optimistic projection, the OBR said.

However, this scenario also projects that GDP could recover to its pre-virus peak by the first quarter of next year.

In its middling scenario, the OBR suggests that GDP could fall by 12.4%, before returning to its pre-virus level by the end of 2022, with "elevated" levels of unemployment and business failures

Despite a recovery in output starting in May, the OBR said it assumes that GDP for June will be "20% below its level in February".

Yesterday the Office for National Statistics (ONS) said that UK GDP grew by 1.8% in May following the easing of the lockdown, but remained a quarter below its pre-pandemic levels.

This figure was also far short of the 5% rise predicted by a consensus of economists.

Dr Birnie said the figures are double confirmation that the recovery from the Covid recession could be very protracted both for the UK.

He said: "The ONS provides further evidence of just how broad and deep the current virus recession is."

He said that from February to May, UK GDP was 19.1% lower than it had been in the previous three months.

"By comparison, the worst quarterly decline during the banking crisis recession was 'only' 2.1%," he pointed out.

"Figures for some individual sectors are striking: education 37.8% decline (schools closure); heath 31.4% decline (less elective surgery and A&E); manufacturing 18% decline, and accommodation and food services 71.7% decline.

"The ONS data are consistent with other indicators which suggest that the bottom of the lockdown recession happened in late April/early May.

UK GDP grew by 1.8% in May, services by 0.9%, manufacturing by 8.4% and construction by 8.2%.

"So, this is the good news, but that good news is qualified.

"The growth is much less than some had expected and would suggest it will be a long time before the economy climbs out of the hole.

"It is true that in May 2020 the volume of sales in paint and hardware stores was back to February levels - evidently due to a lot of DIY activity during lockdown."

Belfast Telegraph