Omicron dents growth prospects of NI economy

A report today says the Omicron version has had a chilling effect on economic predictions for growth in Northern Ireland this year.

anske bank is now forecasting a growth of 4% in 2022, which is lower than the earlier forecast of 4.7%.

Its more pessimistic view follows the version’s impact on consumer-focused sectors such as hospitality.

Danske Bank said the version would also have constrained economic growth in late 2021.

But more optimistically, it has now revised its expectations for the jobs market, and predicts that unemployment will remain at around 3.9%.

Danske Bank estimates that the economy here will expand by 6.2% in 2021, while the UK economy will expand by 7.2%.

But businesses presented a better view of their prospects for the year in a survey by the NI Chamber of Commerce. According to the Chamber, 70% of the members expect their business to grow in 2022.

Danske Bank chief economist Conor Lambe said the outlook for the economy became more bleak as the end of the year approached.

“Northern Ireland’s economy expanded again in the third quarter of 2021 but the pace of growth slowed,” he said.

“Growth is also expected to slow in the fourth quarter as supply-side issues persist and the emergence of the new Omicron coronavirus pandemic likely dampened activity in consumer-focused regions.”

He said the Omicron variant has prompted consumers to behave more cautiously so far this year, while people self-isolating have affected the level of business activity.

“In addition, high inflation and supply chain disruptions are creating challenges for consumers and businesses.”

Danske said Sectors hardest hit by the lockdown, such as housing and food, as well as arts and entertainment, will continue to improve rapidly this year, at 17.7% and 11.7%, respectively. but trading Will get off to a slow start, considering Omicron’s influence.

And while stores and wholesalers enjoyed 7% growth in 2021, Danske Bank said they would feel the pinch this year from a squeeze on household spending and supply chain disruption.

The bank has projected manufacturing to grow around 4% this year, but will be under pressure from rising prices of things like raw materials, energy and wages.

Danske Bank said those factors will also disrupt the construction industry in 2022.

But both professional and scientific, and information and communication sectors were tipped to perform strongly and enjoy growth of around 5%.

And Danske also revised his predictions for the jobs market in 2021.

It has now forecast a 0.2% increase in employee jobs after forecasting a decline in employee jobs in 2021. And that growth will be outpaced by a 1.4% increase in employee jobs this year.

It said the highest employment growth was for the information and communication sector, where jobs grew by 5%. And jobs in the professional and scientific sector are projected to increase by 3.4%.

Jobs in manufacturing are expected to grow by 1% this year. But Danske said it expects construction operations to decline by 3.6% in 2021, although there will be a partial recovery of 2.2% this year.

And with jobs in the arts and entertainment as well as housing and food, through 2021, both sectors are tipped for strong job growth this year.

Similarly, while jobs in wholesale and retail were down this year, they are expected to recover at least partially in 2022.

But Danske Bank said the risk and uncertainty around its forecasts had increased more than usual.

Mr Lambe said: “The emergence of the Omicron coronavirus pandemic and the sharp rise in the number of positive COVID-19 cases has created considerable uncertainty around the economic outlook.

“A prolonged period of supply chain disruption and further upward price pressures also represent potential risks to the performance of the economy in 2022.”

A separate business survey from the NI Chamber for the end of last year found more positives about business conditions among firms, with most members expecting their business to grow this year.

However, rising costs were a big factor, causing nearly three-quarters of members to consider raising their prices over the next three months, the highest figure on record.

Higher raw material costs and pressure to raise wages were causing significant concern, especially for manufacturers. And businesses here were more likely to consider raising their prices than in other areas of Britain.

There was also a strong demand for new employees with over 70% in the recruitment process, although most said they were facing recruitment problems. More than half the businesses were operating below capacity.