Economic rebalancing '˜very hard to achieve' - PwC

The new Stormont Executive faces 'considerable economic and fiscal challenges' as it attempts to regrow the economy if the province leading economist Esmond Birnie has claimed.
Output remains well behind pre-recession levels says Dr Esmond BirnieOutput remains well behind pre-recession levels says Dr Esmond Birnie
Output remains well behind pre-recession levels says Dr Esmond Birnie

Dr Birnie, chief economist with PwC in Belfast, was speaking as figures from the Northern Ireland Composite Economic Index (NICEI) showed that the economy grew by around 1.4% in 2015, well behind the rest of the UK where the average growth was 2.3% over the year.

The Index, produced by the statistics agency NISRA, showed Northern Ireland’s private sector growing by 2.3% in 2015, offset by a decline of 1.3% in public sector output – largely reflecting public sector job reductions and programmes like the Voluntary Exit Scheme.

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Even accounting for positive growth in 2015, local economic output has fallen significantly behind the UK average said Dr Birnie.

“By the end of 2015, the total output of the Northern Ireland economy was still 7.8% lower than its peak value in mid-2007, just before the onset of the banking crisis and the 2008-9 recession,” he said.

“In contrast, by the end of 2015 UK GDP had recovered to 7% above its pre-recession peak.

“In other words, not only is recovery in the Northern Ireland economy relatively slow but it is still both incomplete and mixed.”

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In the final three months of the year, the service sector had grown by 0.6%, while production, dominated by manufacturing,had expanded 1.3%.

Construction, however, experienced a decline of 1.8%, he said adding that there was growing evidence that the Northern Ireland recovery was now running out of steam.

“Output remains well behind pre-recession levels, the most recent unemployment claimant count showed an increase in the jobless total and this week’s Office for National Statistics figures showed that house price growth in Northern Ireland was much lower than that in England,” he said.

Given that scenario, he said pre-election commitments to increase spending would face a challenging environment of continued austerity and very slow economic growth:

“Hard choices around cuts, increasing local taxation, leveraging public sector assets and reforming government seem unavoidable.”