In its latest Northern Ireland Quarterly Sectoral Forecasts report, the bank said it expects the local economy to grow by around 1.1% this year, a slight downward revision from its previous forecast of 1.2%. But Danske Bank is also projecting that the pace of growth will pick up to about 1.4% in 2025.
Conor Lambe, Chief Economist & Head of Strategy at Danske Bank said: “Looking forward into 2025, we expect the pace of growth to increase as closer to target rates of inflation and continued loosening of monetary policy provide some support to consumer expenditure while the measures announced in the Budget are also likely to lead to higher levels of government spending.
“However, despite expectations of continued easing, Bank of England Bank Rate is still expected to remain relatively high and the increase in tax announced within the Budget is also likely to lead to challenges for businesses.”
Sector Outlook
The lower headline rate of inflation relative to the last few years, combined with strong wage growth and the loosening monetary policy environment, is expected to provide some support to the consumer-orientated parts of the economy. Danske Bank is forecasting that output in the accommodation & food service sector will expand by around 1.5% in 2024 and by about 1.7% in 2025. Activity in the wholesale & retail trade and arts, entertainment & recreation sectors is projected to rise by around 1.4% and 1.3% respectively in 2024 then grow at a stronger pace than the overall economy in 2025.
The business services sectors are also forecast to grow at relatively strong rates. The professional, scientific & technical services sector is expected to be the fastest growing in Northern Ireland both this year and next year with output projected to rise by around 1.8% in 2024 and 2.1% in 2025. The information & communication and administrative & support services sectors are expected to experience growth of about 1.4% and 1.5% respectively this year, then 2.0% and 1.9% next year.
Output in the manufacturing sector is projected to increase by around 0.8% in 2024 and about 1.4% in 2025. Construction is also expected to see the pace of growth increase next year, from around 0.9% in 2024 to about 1.5% in 2025.
Labour Market Outlook
Danske Bank expects the labour market in Northern Ireland to soften slightly but remain in a relatively robust position with the annual average number of employee jobs projected to increase by about 0.9% in 2024 and by around 0.8% in 2025.
The Bank is also forecasting that the unemployment rate in Northern Ireland will average around 2.1% this year, before rising to an annual average of about 2.5% in 2025.
As a result of the strong increases in construction employment in Northern Ireland in the first half of the year, Danske Bank expects the sector to show the fastest rate of average jobs growth for 2024 of around 9.4%, then experience a further increase in employment of about 1.1% in 2025.
The wholesale & retail trade sector is expected to experience a rise of around 1.1% in the average number of employee jobs in 2024 and an increase of about 0.9% in 2025.
The professional, scientific & technical services sector is forecast to experience relatively strong jobs growth of around 3.4% this year then about 1.3% next year.
Risks and Uncertainties
Danske Bank said there are several risks and uncertainties around its projections.
Conor Lambe added: “We expect annual inflation to remain slightly above target and to average around 2.4% next year but there are risks to the outlook for the pace of price rises. The higher taxation announced in the Budget could also weigh more heavily than expected on businesses. In addition to this, many firms across the economy are still struggling to fill job vacancies with the skills they require, and geopolitical uncertainty is currently particularly elevated.”
