Danske Bank cuts Northern Ireland growth forecast attributing the revision to weak economic momentum, higher-than-expected inflation, increased business costs and global uncertainties
In its latest Northern Ireland Quarterly Sectoral Forecasts report, the bank said it expects the economy to grow by around 0.9% this year, down from its previous estimate of 1.4%
Danske Bank has lowered its economic growth forecast for Northern Ireland in 2025, citing inflation, higher business taxes, and global factors as key concerns.
In its latest Northern Ireland Quarterly Sectoral Forecasts report, the bank said it expects the economy to grow by around 0.9% this year, down from its previous estimate of 1.4%. Growth is expected to pick up to about 1.4% in 2026.
Danske Bank attributed the revision to weak economic momentum, higher-than-expected inflation, increased business costs from the UK’s autumn Budget, and global uncertainties.
Conor Lambe, chief economist at Danske Bank, said: "We expect the rate of growth to remain relatively modest this year. Additional government spending following the announcements in the autumn Budget may support output levels, and the expected continued loosening of monetary policy should also gradually support household and business spending.
"However, inflation is forecast to be higher than previously anticipated, which could weigh on spending power, while the impact of previous price rises is continuing to affect consumers.
"The upcoming increase in business taxes may negatively impact investment and recruitment, while heightened global uncertainties could also drag on spending and investment levels."
The professional, scientific & technical services sector is forecast to grow by around 1.6% in 2025 and 2.2% in 2026. The information & communication and administrative & support services sectors are projected to expand by about 1.5% and 1.2% respectively this year, both exceeding 2% growth in 2026.
Wholesale & retail trade output is expected to grow by 1.1% this year and 1.7% next year. The accommodation & food service sector is forecast to rise by around 1.0% in 2025 and 1.6% in 2026.
Manufacturing output is set to increase by 0.4% in 2025 and 1.4% the following year. Construction is projected to grow by about 1.0% this year and 1.5% in 2026.
Danske Bank expects employee job growth to slow to around 0.5% this year before increasing slightly to 0.6% in 2026. The unemployment rate is projected to average 2.0% in 2025 and 2.4% in 2026.
Conor added: "We expect inflation to average around 3.2% this year, but there are current and emerging risks that could lead to inflation rising at a faster pace.
"If inflation were to come in higher than expected, it could put more pressure on household purchasing power, slowing economic growth. Monetary policy may also need to remain more restrictive, which could dampen economic activity.
"There is also a risk that global developments could weigh on growth. The global political and economic landscape, including global trade flows, is particularly uncertain at this time."