Northern Ireland recession likely to be avoided in 2023, economists say

While the private sector grows, the public sector may face challenges over the next few years, an economist said

Northern Ireland is likely to avoid recession in 2023 as the economy has shown more resilience than expected, economists at Ulster University (UU) have forecast.

The UU Economic Policy Centre (UUEPC) expects economic output to grow by 0.1% this year, upgrading an earlier forecast of a 1.2% contraction.

But it has warned growth is likely to remain weak in the medium term.

Annual growth rates of less than 2% are forecast out to 2027.

In recent months, business surveys have shown more optimism and activity in Northern Ireland's private sector, while in contrast, the public sector is facing a squeezed budget.

"Despite the very challenging economic environment with 'stickier' inflation and increasing interest rates, the local economy has proved to be a lot more resilient than many had anticipated at the beginning of the year," the UUEPC's director Gareth Hetherington said.

Under a different measurement from that used by the UUEPC, Northern Ireland briefly entered recession in the middle of 2022 before recovering.

'Challenging' approaches ahead

Meanwhile, Mr Hetherington warned that Northern Ireland's public finances will remain very challenging over the next three to five years.

He said a strategic approach to public spending, similar to that seen in the Republic of Ireland after the banking crisis, was needed.

"The current crisis represents our budgetary day of reckoning and we should be taking a similar strategic approach to identifying priorities," he added.

Earlier this month, the independent NI Fiscal Council suggested the operation of the devolution funding formula would increasingly fail to reflect Northern Ireland's needs.

It estimated rate public spending per head in Northern Ireland needed to be 24% higher than in England to deliver comparable public services.

It used population indicators such as age and long-term illness to assess relative need.

The council calculated that spending per head in Northern Ireland is currently 23% higher than England.

But it warned under the current public spending model that premium will fall to 20% by the end of this decade.