Any Q1 Contraction should be short and shallow: Northern Bank
Northern Ireland’s economic output will remain largely flat in 2012, but a small contraction in the first quarter cannot be ruled out, according to Northern Bank Chief Economist Angela McGowan.
The latest ‘Quarterly Sectoral Forecast’ report published today by Northern Bank has estimated growth of only 0.3 per cent for 2012 and 1.8 per cent for 2013. The chances of the local economy slipping back into technical recession have increased, but any contraction would be very small (-0.3%) and should not extend into quarter two.
The report notes that the UK contraction in Quarter 4 last year has increased the chances of a small contraction locally. At the end of last year both the UK and Northern Ireland were negatively impacted by a combination of austerity measures and uncertainty stemming from the European debt crisis. But the report also notes that the dire mood that prevailed in late 2011 has to a large extent lifted and many global – and some UK - indicators have shown significant improvement in the month of January.
Ms McGowan said: “At this moment the largest threat to the economic environment is the ongoing Eurozone crisis which has the potential to upset financial markets and depress investor confidence. There is no doubt the impact of such a scenario would be felt locally and would impact all local sectors. That said, there are also positive influences that are working to support the economy. These range from the general improvement in global economic conditions that we have seen since the start of the year, improvements in European liquidity stemming from the European Central Bank’s 3-year Long-Term Refinancing Operation, and improvements closer to home in terms of falling inflation and improved consumer confidence.”
The latest report forecasts that business will remain subdued for all sectors in Northern Ireland, with no sector experiencing growth above 2 per cent over the year. The best performers will be those sectors which have an international focus, such as Manufacturing, Scientific and Technical Activities, ICT, Agriculture and Tourism (all of which are forecast to grow by between 1 and 2 per cent).
Ms McGowan concluded: “Our manufacturing exports will be affected by the European slowdown in the early part of this year, this along with a less competitive exchange rate will have an impact. Until European problems are resolved we expect to see the Euro stay close to its current (relatively weak) position. Local companies will be forced to regain some competitiveness in European markets through other means, such as increasing productivity, reducing their cost base and innovating”.
Quarterly Sectoral Forecast Report Q1 2012 .
Notes to editor:
- Northern Bank’s sectoral analysis is published on a quarterly basis providing a continuous assessment of the performance of key sectors in the Northern Ireland economy.
- 0.3 per cent GVA Growth is the year on year four quarter average.
- The report highlights that GVA growth rates reflect changes in economic activity rather than economic levels.
- The ‘Quarterly Sectoral Forecasts’ report is published by Northern Bank in association with Oxford Economics. The respected Oxford Economics UK macro model is linked to the wide suite of world models and is consistent with global trends in demand / commodity prices / exchange rates etc. The UK macro model feeds down into the UK industry model which disaggregates employment and output into broad sectors. This is then a parent to the UK regional model. The sub-regional models (LAD model), sits within this regional framework.
- The sectors analysed are consistent with the 2007 Standard Industrial Classification whereas previous releases were based upon 2003 Standard Industrial Classifications.
- Economic activity or output is measured by Gross Value Added (GVA).