Danske Bank has slightly lowered its forecast for economic growth in Northern Ireland in the year just ending but expects the economy to pick up stronger in 2025.
In its latest regional quarterly sectoral forecasts report, the bank said it expects the north’s economy to grow by 1.1% this year - a narrowly downwards revision from its previous forecast of 1.2%.
But it is also projecting that the pace of growth will pick up to 1.4% in 2025, led by sectors like accommodation and food service, professional, scientific and technical services, and even construction, which has taken a battering in recent years.
Danske Bank’s chief economist & head of strategy Conor Lambe said: “We expect the pace of growth to increase in 2025 as closer-to-target rates of inflation and continued loosening of monetary policy provide some support to consumer expenditure, while the measures announced in the Budget are also likely to lead to higher levels of government spending.
“But despite expectations of continued easing, Bank of England bank rate is still expected to remain relatively high and the increase in tax announced within the Budget is also likely to lead to challenges for businesses.”
The lower headline rate of inflation relative to the last few years, combined with strong wage growth and the loosening monetary policy environment, is expected to provide some support to the consumer-orientated parts of the economy.
Danske Bank predicts that output in the accommodation & food service sector will expand by 1.5% in 2024 and by 1.7% in 2025, while it forecasts that activity in the wholesale & retail trade and arts, entertainment & recreation sectors is projected to rise by 1.4% and 1.3% respectively in 2024 then grow at a stronger pace than the overall economy in 2025.
The professional, scientific & technical services sector is expected to be the fastest growing in Northern Ireland both this year and next year with output projected to rise by around 1.8% in 2024 and 2.1% in 2025.
The information & communication and administrative & support services sectors are expected to experience growth of about 1.4% and 1.5% respectively this year, then 2% and 1.9% next year.
Output in the manufacturing sector is projected to increase by 0.8% in 2024 and 1.4% in 2025, and construction is also expected to see the pace of growth increase next year, from 0.9% in 2024 to about 1.5% next year.
The north’s labour market is expected to soften slightly, Danske says, but remain in a relatively robust position with the annual average number of employee jobs projected to increase by 0.9% this year and then by 0.8% in 2025.
The bank is also forecasting that the unemployment rate in Northern Ireland will average around 2.1% this year, but rise to an annual average of 2.5% in 2025.
As a result of the strong increases in construction employment here in the first half of this year, Danske expects the sector to show the fastest rate of average jobs growth for 2024 of around 9.4%, then experience a further increase of 1.1% in 2025.
Mr Lambe added: “We expect annual inflation to remain slightly above target and to average around 2.4% next year but there are risks to the outlook for the pace of price rises.
“The higher taxation announced in the Budget could also weigh more heavily than expected on businesses.
“In addition to this, many firms across the economy are still struggling to fill job vacancies with the skills they require, and geopolitical uncertainty is currently particularly elevated.”
