Forecast sees North's economy stagnating

Tue, Jul 31, 2012, 01:00

NORTHERN IRELAND’S economy has moved into reverse gear and is in the same place it was 18 months ago, latest economic forecasts suggest.

According to new research published by the Northern Bank today, the North’s economy is “stagnating” and any potential recovery is far on the horizon. The bank has revised its local economic growth forecast for 2012 down from 0.3 per cent to just 0.1 per cent.

The bank believes conditions for growing the North’s private sector or securing an export-led economic boost are “far from ideal”. It has also highlighted local concerns that the strength of sterling will continue to work against certain businesses.

Angela McGowan, Northern Bank chief economist, said: “A highly uncertain environment, a deteriorating UK economy, low levels of demand and a stronger pound relative to the weakening euro have presented the local business community with increasingly difficult trading conditions.”

Ms McGowan believes the single most significant influence in the months ahead will be Europe and the exchange rate.

Northern Bank believes the impact of the European debt crisis will be less severe in Northern Ireland than it will in England, Scotland or Wales simply because of the size of the local private sector.

But Ms McGowan said firms in the North that are actively exporting – particularly in the agriculture or manufacturing sectors – will suffer because they have lost a degree of competitiveness due to the stronger pound.

“While it is possible to hedge against exchange rate fluctuations, it is impossible to protect firms from European policies or policy developments that damage both private demand and investment conditions,” she said.