Danske Bank downgrades growth outlook for Northern Ireland economy

In its latest Northern Ireland Quarterly Sectoral Forecasts report, the Bank is forecasting growth of around 3.6% in 2022, down from its previous forecast of 4.0%, and is forecasting growth of about 1.7% in 2023.

Danske Bank chief economist, Conor Lambe, said: “The Northern Ireland economy grew in the final quarter of 2021 and is estimated to have expanded again in the first quarter of 2022. However, looking forward, the outlook for the economy is particularly uncertain as the war in Ukraine, high inflation, changes to the economic policy environment and Covid-19 all have the potential to impact economic performance.

“We expect the pace of economic growth to weaken as high inflation squeezes consumer incomes and both fiscal and monetary policy are becoming less accommodative, with these factors contributing to the downward revision to our economic growth forecast for 2022.”

Danske Bank expects the rate of price rises to increase further and is forecasting that inflation will average around 7.2% in 2022 and 3.8% in 2023.

Sector outlook

Danske Bank expects the accommodation & food services (16.2%) and arts, entertainment & recreation (10.5%) sectors to post the strongest growth rates again in 2022 after a strong 2021. However, as we move towards 2023 the rate of expansion in these sectors is expected to slow as the rebound effects following the sharp drops in activity brought about by the pandemic fade away and the impact of high inflation weighs on spending in consumer-focused sectors.

Output in the wholesale & retail trade sector is also expected to be held back by the squeeze on household purchasing power, supply chain disruption and falling consumer confidence, with Danske Bank forecasting growth of 3.4% in 2022 and 0.8% in 2023.

With ongoing supply constraints and upward price pressures for raw materials, energy and wages, the Bank is forecasting that output in the manufacturing sector will grow by around 3.0% in 2022, lower than the pace of growth for the overall economy. The construction and agriculture, forestry and fishing sectors may also be affected by these issues and are forecast to grow by about 3.7% and 1.2% respectively in 2022.

The information & communication and professional, scientific & technical services sectors are expected to perform strongly, with output growth in 2022 forecast at 5.3% and 4.6% respectively.

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