The Northern Ireland economy is already in recession and will fare worse than the UK as a whole during the current downturn, leading bankers said today.
There will be a sharp rise in unemployment as the local economy contracts by 1.5 per cent next year following zero growth this year, according to the Ulster Bank's latest NI Quarterly Economic Review.
Exporters will be badly hit in 2009 and by the end of the year house prices will be down 40 per cent on their August 2007 peak, it predicted.
Adding to the gloom, the bank said the province's large public sector would not be a buffer against recession as it was in the early 1990s.
Ulster Bank economist Richard Ramsey said with a large exposure to the retail and construction sectors, combined with a significant slowdown in public expenditure, Northern Ireland would suffer more than the UK as a whole during the downturn.
He also predicted unemployment would shoot above 6 per cent— latest government figures put it at 4.3 per cent — as all sectors of the local economy slowed down.
It would include significant slowdowns in both the retail and business services sectors which have been the key drivers of employment growth in recent years, he warned.
"As the UK hit the trough of its recession in 1991, Northern Ireland actually recorded economic growth that year of 1.4 per cent. This time around, the large local public sector will again offer some protection as approximately 30 per cent of workers here are employed in the public sector compared to around 20 per cent in the UK as a whole," he said.
However, he added: "Due to its exposure to the housing market downturn and to consumer sensitive sectors such as retail, Northern Ireland will not escape recession and will actually fare worse than the UK as a whole."
The zero growth this year and 1.5 per cent contraction next year is in contrast to growth of 0.8 per cent for the UK in 2008 and a contraction of 1 per cent next year.
"It is our view that the local economy is already in recession with private sector output having contracted for the past four quarters," said Mr Ramsey.
He said the Purchasing Managers' Indices — highly respected international economic indicators — have pointed to a market weakening of economic activity in Northern Ireland in recent months.
Record lows were recorded for both the UK and Northern Ireland in September, with the province significantly below the UK level.
"Since the middle of 2007, the local economy has experienced a rapid slowdown and at a much faster rate than the UK average.
"Indeed Northern Ireland has experienced the sharpest contraction in business activity of all the UK regions during the 12 months to September 2008," said Mr Ramsey.
Construction has borne the brunt of the showdown, however the manufacturing sector recorded the sharpest falls in output and employment in the third quarter of the year, he said.
"As our two biggest trading partners, the rest of the UK and the Republic of Ireland, enter recession, local exporters will be impacted significantly and exports in 2009 will fall," he added.
PA