Inflation: Danske Bank lowers forecast for Northern Ireland economy in 2023
DANSKE Bank has lowered its expectations for the Northern Ireland economy next year.
The lender said rising inflation alongside the “economic policy environment” and political uncertainty are causing the northern economy to slow in 2022.
In its latest outlook, the bank said that despite signs of a slowdown between the first and second quarters, it expects the northern economy to continue to grow in line with its previous forecast of 3.6% for 2022. .
But Danske Bank cut its outlook for 2023 from 1.7% to just 1%.
On Wednesday, the Organization for Economic Co-operation and Development (OECD) predicted that Britain’s economy will grow from 3.6% in 2022 to 0% in 2023, the slowest of the G7 countries.
The same report predicts that the economy of the Republic of Ireland will grow by 4.8% in 2022 and 2.7% in 2023,
Experimental estimates from the UK’s Office for National Statistics (ONS) indicate that Northern Ireland’s economy grew by 0.4% between the last quarter of 2021 and the first quarter of 2022.
It followed strong growth figures in 2021, suggesting that only London has performed better than Northern Ireland among UK regions since the end of 2019.
Danske Bank’s chief economist, Conor Lambe, said pressure on household incomes would intensify later in the year, slowing the economy.
Inflation in the UK jumped to 9% in April, with the Bank of England expecting it to hit double-digit growth before falling again.
The republic’s inflation rate hit a 38-year high of 7.8% in May, the Central Bureau of Statistics confirmed yesterday.
“If inflation is higher than expected and remains at higher levels for a longer period, it has the potential to further limit economic growth,” Lambe said.
“That could happen if fuel and energy prices stay higher for longer, if supply chains take longer to normalize, or if the current tight labor market starts to drive inflation further. driven by the domestic market, with a wage-price spiral keeping the rate of price inflation above its target rate.”
Road fuel prices are up 43% in Northern Ireland year-on-year, with diesel averaging 183.8p/litre and petrol 180.1p/litre.
“Higher and more prolonged inflation could also mean that the bank rate would be increased at a faster rate to contain the rate of price increases, which could further dampen economic activity.
“The continued disruption of the supply chain could also negatively impact the activity levels of goods-based businesses if they are unable to source the products they sell or use as inputs. “