North has emerged from recession, says bank report

NORTHERN IRELAND has officially emerged from the recession, according to new research from Northern Bank, which suggests the local economy stopped shrinking in the third quarter of 2009.

In its latest Quarterly Sectoral Forecasts, published today, the bank predicts that economic growth will return in the North before the end of the year.

Angela McGowan, economist at Northern Bank, believes the majority of sectors will see a weak growth of about 0.9 per cent, boosted by consumer spending over Christmas.

“The current improvement in the local economy is primarily being driven by a number of factors, including the combination of monetary and fiscal intervention, improved confidence as the global economy recovers, the seasonal impact on household demand, as well as a favourable exchange rate,” she said.

“It should be noted that while Northern Ireland may have technically come out of recession, overall economic activity levels are still weak.”

The latest research from the bank shows that while there has been a slight improvement in some sectors, any business related to the housing industry is still continuing to suffer from the fall-out of the recession and the slump in property prices in the North.

Construction-related industries, including building product suppliers, manufacturing and conveyancing, have been the worst hit, and it is likely that these industries will suffer further job losses next year.

Although Ms McGowan believes that while there is a risk of a slight dip in economic activity in the first quarter of next year, she is forecasting a modest 1.2 per cent increase overall in economic growth for 2010.

She said business services should do particularly well in Northern Ireland as the recovery gains momentum, with year-on-year growth expected to reach 3.6 per cent by the end of 2010.

However, the economist is also warning that there are certain factors that could significantly affect the strength and sustainability of the economic recovery in the North.

Ms McGowan said Northern Ireland’s long-term economic future revolved around its ability to develop a strong export-orientated private sector.

“Sustainability of the local recovery will depend upon stability returning to the local labour market.

“We expect a peak in unemployment in Northern Ireland in the second quarter of next year – after that, if confidence takes hold, there is a lot of built-up demand that could be unleashed,” she said.

“Quite simply, labour market stability allows households to be less cautious with regard to expenditure. Confidence in public finances is also important for investor confidence, so government plans for fiscal control will play a key role in the recovery process,” she added.