NI economy likely contracted in Q1 but vaccine rollout and prospect of restrictions lifting offers hope for growth in 2021
The coronavirus restrictions in place throughout the first quarter of this year are likely to lead to a contraction in economic activity in that period. However, the fall in coronavirus case numbers and the successful rollout of the vaccine programme are expected to lead to the gradual easing of the restrictions throughout 2021 with the local economy returning to positive rates of growth from the second quarter onwards. Economic policy measures are also expected to support people and businesses as the economy begins to recover from the impacts of the pandemic. Against this backdrop, we have upgraded our forecasts for economic growth in Northern Ireland this year and now expect the local economy to expand by around 4.8% in 2021, with growth of about 5.8% projected for 2022.
Government policy measures have helped to limit job losses since the beginning of the pandemic, with the extension of the Furlough scheme until September 2021 expected to continue supporting the labour market. However, despite the extensive support in place, the labour market has continued to weaken and we expect further job losses to occur this year as the full labour market impacts of the pandemic begin to materialise. We are forecasting that the annual average number of employee jobs in Northern Ireland will decline by around 1.9% in 2021, with jobs growth returning in 2022 at about 1.0%. We also expect the unemployment rate to average 5.0% in 2021 and 5.2% in 2022.
