Northern Ireland’s economy is expected to fall into recession next year in the face of high inflation, low consumer confidence and higher borrowing costs, a new report has warned.
In its latest quarterly bulletin, Danske Bank forecast economic activity in the North would decline by 1 per cent in 2023.
It also warned that if UK inflation stayed higher for longer this had “the potential to constrain economic activity even further”.
Danske Bank said the downturn would lead to an increase in unemployment from 2.9 per cent this year to 3.9 per cent in 2023 as employment levels decline.
The North’s wholesale and retail trade sector is expected to experience the deepest contraction of around 4.5 per cent next year after experiencing an expected fall in output of around 2.2 per cent this year.
Other consumer-focused sectors including, accommodation and food services; and arts, entertainment and recreation are also projected to experience falls in output (of close to 4 per cent each) following very strong rates of growth in 2022.
The information and communication and professional, scientific and technical services sectors are forecast to grow slightly next year.
“The UK economy contracted in the third quarter of 2022 and we think that economic activity in Northern Ireland is also likely to have declined,” Danske Bank chief economist Conor Lambe said.
“Output is then projected to fall further in the final quarter of the year and through most of next year with both economies experiencing a period of recession as a number of factors adversely impact activity levels,” he said.
“Inflation is expected to decline gradually during 2023 but remain elevated and weigh down on household purchasing power,” Mr Lambe said.
“Consumer confidence is also particularly low and monetary policy is tightening. Looking forward, and while noting the considerable uncertainty around the outlook, we expect annual output in Northern Ireland to decline by around one percent next year,” he said.
