Higher number of coronavirus cases and need for tighter restrictions slows Northern Ireland's economic recovery
The Northern Ireland economy continues to be heavily influenced by the coronavirus pandemic, with the tighter restrictions in both the final quarter of 2020 and the first quarter of 2021 stalling the recovery that had begun over the summer and the early autumn. The rollout of the vaccine programme will hopefully see the gradual economic recovery restart in the second quarter of 2021, however it is likely to be a number of years before output returns to its pre-coronavirus level and there is still a great deal of uncertainty and risk to the outlook. We estimate that the Northern Ireland economy contracted by around 11% in 2020 and have revised our forecasts for 2021 downwards and now believe that the local economy will only expand by about 4% in 2021.
Government measures are continuing to provide some protection to jobs but, despite the policy support, the labour market has deteriorated due to the pandemic. The extension of the Furlough scheme until the end of April 2021 should continue to limit the number of job losses, but nevertheless, we still expect the labour market to weaken further in 2021. We are projecting that the annual average number of employee jobs fell by around 0.3% in 2020 with a larger decline of 3.0% expected in 2021, and that the annual average unemployment rate will increase from an estimated 3.5% in 2020 to 6.7% in 2021.