Economic growth in the province is set to slow “significantly” due to Brexit-related uncertainty, lower investment and higher inflation in the medium term, according to new economic forecasts from Danske Bank.
There is “a chance”, however, that Northern Ireland could avoid outright recession, the bank says.
The Quarterly Sectoral Forecast report, published this morning, suggests that the economy will grow by 1% this year and 0.5% in 2017, figures revised down from the previous report, which mooted growth of 1.6% for 2016 and and 1.9% in 2017.
“We stress that uncertainty surrounding our forecasts is higher than usual as the Brexit withdrawal negotiations are only set to begin early next year,” said Danske chief economist, Angela McGowan.
“The initial shock of the referendum result appears to have now faded and given way to a more stable picture - albeit a temporary one.
“There is no doubt that the current lack of clarity around future trade relations, access to skills, the border and future funding streams will all negatively impact upon investment and recruitment in the year ahead. However, we must balance that uncertainty with the fact that policy levers will be used to offset some of this damage and the weak pound should lift exports. The forthcoming Autumn Statement should be one of the most interesting for years.”
Without doubt, she said the best deal on Brexit was one that “keeps Northern Ireland as close to the EU as possible” and if achieved could “help to nudge the current forecasts upwards”.
For many NI firms, she said it made sense to carry on in a ‘business as usual’ mode as access to markets had not yet changed.
“In addition, domestic consumption appears to be holding up well,” she added.
“There is little doubt from business surveys that investment intentions have lowered. Some expansion plans are on hold and recent business polls have suggested that recruitment has also slowed.”
“It is clear that as the UK enters its Brexit negotiations there is a lot at stake for the regional economy.
“For a number of sectors across Northern Ireland, access to the Single market and access to skills will be paramount.
“Local worries also include cross border trade, collaborative university research funding and the impact on other EU funding streams on areas such as infrastructure and Peace and Reconciliation.”