An outbreak of civil unrest in Northern Ireland this summer would set back economic development and severely undermine business confidence, according to First Trust Bank.
In its latest Economic Outlook and Business Review the AIB owned bank forecast that even without any trouble arising from Drumcree or other developments, economic growth is expected to slacken further and unemployment to edge upwards.
The Northern Ireland economy has slowed sharply in recent months and is now a two-tier or two-speed economy, according to First Trust. Manufacturing output fell by 1 per cent in the last quarter of 1998, although it is still growing faster than in the rest of the UK. There were also sharp declines in the chemicals sector and in clothing and textiles, while output in food, drink and tobacco rose strongly.
On top of this, new housing starts fell back sharply in the last three months of 1998. And registrations of new cars also fell back from their peak during the first few months of the year.
Despite this, employment rose strongly by 3,000 during the final three months of last year, with nearly all the increase in the service sector. The manufacturing sector shed nearly 500 jobs. According to First Trust, these broad trends point to a two-tier economy. But there is also some evidence that the service sector may also begin to suffer.
Northern Irish retailers are experiencing difficult trading conditions, with households and consumers becoming increasingly reluctant to spend, despite the fact that household incomes have been growing strongly, boosted by falling interest rates and low inflation.
As a result, First Trust is now predicting that growth will reach only 1 per cent this year and 2.5 per cent in 2000.
The Northern Irish economy is also being undermined by trends in the UK economy, according to First Trust. Over the past 18 months strong sterling, coupled with sharply higher vehicle and road fuel excise duties, have been creating serious difficulties for small business particularly in the Border areas.
