Danske Bank has lowered its forecast for economic growth in Northern Ireland in 2025 from 1.4% to just 0.9% as inflation, higher business taxes and global factors weigh heavily on the outlook.
Its latest Northern Ireland quarterly sectoral forecast reflects a “lack of momentum” in the local economy and warns that inflation is likely to run higher than previously expected.
The increase in business costs following the UK’s autumn Budget and elevated uncertainty stemming from emerging global risks are also cited as reasons for the downgrade, although Danske expects the rate of growth to pick up to about 1.4% again in 2026.
The bank’s chief economist Conor Lambe said: “We expect the rate of growth to remain relatively modest this year.
“Additional government spending following the announcements in the autumn Budget may support output levels and the expected continued loosening of monetary policy should also gradually support household and business spending.
“Inflation is forecast to be higher than previously anticipated which could weigh on spending power, while the impact of previous price rises is continuing to weigh on consumers.
“The upcoming increase in business taxes may negatively impact on investment and recruitment while heightened global uncertainties could also drag on spending and investment levels.”
Business services sectors, historically strong performers in the north, are expected to experience the highest rates of GVA growth this year and next, with professional, scientific & technical services predicted to grow at 1.6% in 2025 and about 2.2% in 2026; and the information & communication and administrative & support services sectors expected to grow by 1.5% and 1.2% respectively this year, then above 2% next year.
Danske predicts the wholesale & retail trade sector will expand by around 1.1% this year and 1.7% next year; accommodation & food service sector by 1.0% and then 1.6%; manufacturing by 0.4% then 1.4%; and construction by 1.0% then 1.5%.
The bank’s report is projecting that the growth rate of the annual average number of employee jobs in the north will slow to around 0.5% this year while the unemployment will average around 2.0%, and it also expect inflation to average 3.2% this year.