Northern Ireland’s economy is expected to contract next year

Economists at the University of Ulster expect Northern Ireland’s economy to contract next year, followed by a weak recovery in 2024.

The Ulster University Economic Policy Center (UUEPC) estimates that output will fall by 1.2% in 2023.

The forecast for 2024 is growth of 1.7%, with a similar outlook for the whole of the United Kingdom.

It also suggests that the Bank of England cannot raise interest rates much beyond the current 3%.

UUEPC director Gareth Hetherington said a further rise in interest rates this month is “almost inevitable” but future increases could be smaller and “we may be nearing the end of the current tightening cycle.”

Interest rates were just 0.25% at the start of this year, but have risen steadily as the Bank of England has tried to ride out skyrocketing inflation.

Hetherington said the latest report from the Bank of England’s monetary policy committee included analysis suggesting inflation could fall below its 2% target in three years, even if rates remain at 3%.

“This would suggest that interest rates may not need to rise further, but the report also emphasized that risks were skewed towards higher inflation,” he added.

The UUEPC forecasts interest rates to be 3.5% at the end of 2022 and 2023 with average inflation of 7.4% next year.

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