EY: Northern Ireland economy to expand by 0.7% in 2024, but job growth expected to 'stall'

The Northern Ireland economy is expected to expand by 0.7% in 2024 and 1.6% in 2025, according to a forecast from professional services giant EY.

However the EY Ireland’s Winter 2024 Economic Eye report, published today, forecasts that employment growth will ‘stall’ in Northern Ireland in 2024, before returning to a more positive trajectory in 2025, growing by 0.9%

According to the report, recent political developments including the restoration of power sharing and the installation of a new Stormont Executive offers the opportunity to unlock further growth potential within the Northern Ireland economy.

Dr Loretta O’Sullivan, EY Ireland chief economist, explained: “After stellar economic growth in Ireland in 2021 and 2022 and some normalisation in 2023, we are looking at reasonably solid growth in 2024. For Northern Ireland we are forecasting a modest expansion this year.

“While the international economic environment is still relatively subdued and tighter monetary policy is biting, disinflation is helping to restore households’ purchasing power. Economic momentum is expected to build as the European Central Bank and the Bank of England begin to loosen monetary policy and financing conditions for business investment become more favourable and as trading partner demand improves. With all of this in mind the outlook for 2025 is stronger.”

In the same report, EY also forecast the Republic’s GDP will rise by 2.2% in 2024, rising to 3.8% in 2025.

Dr O’Sullivan added: “As developments in the labour market typically lag those in the economy, some cooling is not surprising. But even though jobs growth is forecast to moderate in the Republic of Ireland and stall in Northern Ireland in 2024, unemployment rates are projected to remain low by historical standards.

"So, recruitment and retention will continue to be an issue for many businesses. For workers, the still tight labour market, along with some compensation for past inflation, as well as the proposed public sector pay agreement, point to further wage increases across the economy.

After flatlining in 2023, the Northern Irish economy is projected to expand by 0.7% in 2024. Private sector activity has picked up according to the latest Purchasing Managers’ Index while decelerating inflation will provide some respite for households over the coming months. Bank of England interest rate cuts are a real prospect this year, albeit past increases are continuing to have a dampening effect on the economy. Encouragingly, the unemployment rate in Northern Ireland is very low at 2.4%, although we expect this to nudge higher in 2024.

“While the immediate growth outlook for the Northern Ireland economy is modest, there are grounds for optimism into the medium term. The labour market is resilient, inflation is declining and the recent restoration of power sharing offers the opportunity to unlock the economic potential of Northern Ireland”, Dr O’Sullivan concluded.