The Northern Ireland economy is “weathering a sustained fiscal storm” as 2024 draws to a close, with lower growth likely than was forecast this time a year ago, economists say.
The December 2024 outlook published by the Ulster University Economic Policy Centre (UUEPC) reveals that the local economy has had a relatively strong 2024, particularly in the first half of the year, when it exceeded UK performance.
But recent indicators, coming in the wake of a painful UK Budget, point to slower growth in the second half of this year.
Additional borrowing and spending announced in the Budget will increase growth in the short term, but raises inflation expectations and interest rates. With higher taxes coming, particularly National Insurance Contributions, lower growth can be expected in the medium term.
The UUEPC, which is an independent economic research centre focused on producing evidence-based research to inform policy development and implementation, predicts that the north’s GVA growth for 2024 will come in at 1.9%, which is above the UK figure of 1.2%.
But this, it says will fall back to 1.5% in 2025 in Northern Ireland and then stay generally flat in the following three years at 1.6%, 1.4% and 1.4% again.
Long-term employment growth will continue, the economists expect, but at a reducing rate.
And given the already low level of unemployment and greater constraints on immigration, such growth will require an ability to transition individuals out of economic inactivity and into the workforce.
The UUEPC outlook shows that the economic outlook for key sectors in the north presents a mixed picture, with both challenges and areas of growth.
Construction has been through a particularly challenging period, but more recently has started to recover, with workforce jobs increasing by 16.3% over the 12 months to June.
Increased capital spending announced in the Budget should help underpin recovery in the medium term, the UUEPC experts predict, but this requires appropriate infrastructure investment decisions by the Stormont Executive.
Private sector services have also outperformed the UK in terms of output and employment, employment in the last year, particularly in retail and professional services. Despite business confidence being subdued, the Bank of England’s rate reduction cycle offers some optimism for continued consumer confidence and sectoral growth.
In the public sector, additional funding of £1.5 billion for the north announced by Rachel Reeves in her Budget will be crucial for addressing pressing issues across health, education, and infrastructure.
Notably, NI Water’s six-year business plan highlighted plans for £2.1 billion investment during this period, which is essential to lift constraints on development projects across the region.
However, the public sector still faces significant challenges, particularly in healthcare, with long waiting lists and the need for reform to manage a growing older age population. The education sector also faces pressures with declining pupil numbers and an estate in need of modernisation.
More broadly, changing demographics also implies an aging profile of the labour force, with those in their 20s expected to fall by 17,000 and those from 61-66 expected to increase by 16,000 by 2050.
This may require employers to consider more flexible working arrangements and greater emphasis on training and development to keep older workers in the labour market for longer.
Dr Myles Patton, principal economist at the UUEPC, said: “Despite considerable economic turbulence, the Northern Ireland economy has displayed robust strength and performed relatively well in 2024, largely due to the local labour market with increasing workforce jobs underpinned by expansion in the professional services, manufacturing and health sectors.
“Looking ahead, growth is expected to slow. But if the NI Executive make the right economic focused investment decisions, recovery can be expected in the medium and longer term.”
