Economic growth likely returned in second quarter as restrictions were eased with further rise in activity expected in second half of the year
Following an expected contraction in the first quarter of the year, the gradual easing of coronavirus restrictions throughout the second quarter is likely to have enabled the Northern Ireland economy to return to growth. Early indicators at a UK level show a strong rebound in activity through April and May, and we expect something similar to have occurred in Northern Ireland. We also believe that the easing of restrictions and the successful rollout of the vaccine programme will continue to support the recovery over the coming months. As such, we have upgraded our forecasts for economic growth in Northern Ireland this year and now expect the economy to expand by 6.2% in 2021, with growth of around 4.5% projected for 2022. However, the uncertain future path of the pandemic continues to remain a downside risk to the outlook.
The latest data from the Quarterly Employment Survey suggests that demand in the Northern Ireland labour market is beginning to pick up, with a rise in employment of 0.3% in March 2021 ending four consecutive quarters of decline. Throughout the pandemic government support schemes, particularly the Furlough Scheme, have helped to limit job losses. These measures are expected to continue supporting the labour market, especially in the hardest hit sectors, until the end of September 2021. We still expect employment to decline as the support schemes wind down and come to an end but are hopeful that the strengthening of economic growth and labour demand may limit the rise in unemployment. Overall, we are forecasting that the annual average number of employee jobs in Northern Ireland will fall by 1.2% in 2021, before returning to growth of around 1.0% in 2022. We also expect the unemployment rate to average 4.2% in 2021 and 4.6% in 2022.
