Danske Bank Lowers Forecast For Growth of NI Economy in 2022

  • Danske Bank has lowered its forecast for the growth of the Northern Ireland economy in 2022 and expects the pace of economic growth to have slowed in the final quarter of 2021, in part due to the impact of the Omicron coronavirus variant on consumer-focused sectors.

    In its latest Northern Ireland Quarterly Sectoral Forecasts report, the Bank estimates that the Northern Ireland economy grew by 6.2% in 2021, and is now forecasting growth of around 4.0% in 2022, down from its previous forecast of 4.7% for the year.

    Speaking about the new figures, Danske Bank Chief Economist, Conor Lambe, said: “The Northern Ireland economy expanded again in the third quarter of 2021 but the pace of growth slowed. Growth is also expected to have slowed in the fourth quarter as supply side issues continued and the emergence of the new Omicron coronavirus variant likely stifled activity in the consumer-focused sectors.”

    Mr. Lambe also added: “The new coronavirus variant and the rise in positive Covid-19 case numbers have increased the likelihood of consumers behaving more cautiously at the beginning of 2022 and more people having to self-isolate is also likely to weigh on activity levels. In addition to this, high inflation and supply chain disruption are continuing to pose challenges for consumers and businesses.”

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    Sector Outlook

    Danske Bank expects the consumer-focused sectors – accommodation & food services (17.7% in 2022) and arts, entertainment & recreation (11.7% in 2022) – to post the strongest growth rates again in 2022 as their recovery from the large annual drops in output in 2020 continues. However, this expansion is likely to be at a slower pace than previously forecasted given the potential for a subdued start to the year resulting from the emergence of the Omicron coronavirus variant.

    Output in the wholesale & retail trade sector is estimated to have risen by 7.0% in 2021. However, the squeeze on household purchasing power, supply chain disruption and deteriorating consumer sentiment may lead to both demand and supply challenges in this sector. The Bank is forecasting growth of 4.2% in this industry in 2022.

    With ongoing supply constraints and upward price pressures for raw materials, energy and wages, the Bank forecasts that output in the manufacturing sector will grow by around 3.9% in 2022. The construction industry may also be affected by some of these issues and it is expected that activity will grow by around 4.6% in 2022 following projected growth of 6.3% in 2021.

    The professional, scientific & technical services and information & communication sectors are expected to perform strongly, with the Bank forecasting growth of around 4.9% in both sectors in 2022.

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    Labour market outlook

    Having previously expected a fall in the annual number of employee jobs in 2021, Danske Bank now estimates that the annual average number of employee jobs increased by 0.2%, with further growth of around 1.4% projected for 2022.

    The information & communication sector is estimated to have experienced the largest annual rise in employment of 5.0% in 2021, and the professional, scientific & technical services sector is also projected to have seen strong jobs growth of 3.4%.

    Employment in the manufacturing sector is estimated to have risen by 0.4% in 2021 with further growth of around 1.0% forecast for 2022. However, the construction sector is estimated to have experienced a sharp fall of 3.6% in the number of employee jobs in 2021, with an annual rise in employment of 2.2% projected in 2022.

    The annual average number of employee jobs in the arts, entertainment & recreation and accommodation & food services sectors is estimated to have declined by 3.5% and 2.5% respectively in 2021. However, these sectors are forecast to achieve relatively high rates of job growth in 2022, of 3.4% and 2.6% respectively, as their recovery continues. Similarly, wholesale & retail trade is forecast to experience a 1.8% rise in employment in 2022, following an estimated contraction of 2.6% in 2021.

    Danske Bank is forecasting that the unemployment rate in Northern Ireland will average around 3.9% in 2022, similar to the 3.8% estimate for 2021.

    Risks and uncertainties

    While there is always uncertainty around economic forecasts, Danske Bank said the extent of the risks and uncertainties around these projections is still more elevated than normal.

    Conor Lambe said: “The emergence of the Omicron coronavirus variant and the sharp rise in the number of positive Covid-19 cases has created considerable uncertainty around the economic outlook. A prolonged period of supply chain disruption and further upward price pressures also represent potential risks to the performance of the economy in 2022."

    Source: Written from press release.

    About the author

    Aoife is a Sync NI writer with a previous background working in print, online and broadcast media. She has a keen interest in all things tech related. To connect with Aoife feel free to send her an email or connect on LinkedIn.

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