New forecasts predict output to contract by about 1.0% next year
Northern Ireland's economy is likely to experience a period of recession, according to the latest economic report from Danske Bank.
The bank says there has been some recovery since the pandemic but output is expected to contract by about 1% next year.
Economists say it is due to a number of factors including high inflation, low consumer confidence and tighter monetary policy.
Danske Bank Chief Economist, Conor Lambe, said: "The UK economy contracted in the third quarter of 2022 and we think that economic activity in Northern Ireland is also likely to have declined.
"Output is then projected to fall further in the final quarter of the year and through most of next year with both economies experiencing a period of recession as a number of factors adversely impact activity levels. "Inflation is expected to decline gradually during 2023 but remain elevated and weigh down on household purchasing power.
"Consumer confidence is also particularly low and monetary policy is tightening.
"Looking forward, and while noting the considerable uncertainty around the outlook, we expect annual output in Northern Ireland to decline by around one percent next year."
The bank is also forecasting that the wholesale & retail trade sector will experience the deepest contraction of around 4.5% next year, after experiencing an expected fall in output of around 2.2% in 2022. Other consumer-focused sectors including accommodation & food services and arts, entertainment & recreation are also projected to experience falls in output in 2023 following very strong rates of growth in 2022 as annual output recovered from the impacts of the pandemic.
Activity levels are forecast to decline by around 3.9% and 3.8% respectively in the two sectors in 2023. The Bank is also projecting that the manufacturing sector will grow by around 2.1% this year, before experiencing a decline in output of about 1.1% next year.
Output in the construction sector is forecast to fall by 1.0% next year, following expected growth of about 3.0% this year. The information & communication and professional, scientific & technical services sectors are forecast to grow slightly next year, by 0.1%.
Education and administrative & support services are among the other sectors forecast to avoid a decline in annual output in 2023. Danske Bank expects the annual average number of employee jobs to increase by around 2.7% in 2022.
However, with annual economic output expected to decline in 2023, the Bank is projecting that the average number of jobs will fall by around 1.0% next year.
The Bank is also forecasting that the unemployment rate in Northern Ireland will average around 2.9% in 2022, before increasing to an annual average of 3.9% in 2023 as employment levels decline. Employment in the wholesale & retail trade sector is projected to decline by around 2.6% in 2023.
For the arts, entertainment & recreation sector, employee jobs are projected to reduce by 2.0%, following expected growth of 2.4% in 2022.
The number of jobs in the accommodation & food services sector is also expected to decline in 2023, by around 1.7%. The manufacturing sector is forecast to experience a decline in the number of jobs of around 2.2% in 2023, after projected growth of 1.9% in 2022.
In addition, the administrative & support services sector is also expected to experience a contraction of 1.7% in employment in 2023. With less reliance on consumer spending, the information & communication and professional, scientific & technical services sectors are expected to experience the strongest rates of jobs growth next year with annual employment projected to rise by 1.3% and 1.0% respectively in 2023.
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