Northern Ireland economy expected to shrink next year

Ulster University economists expect the Northern Ireland economy to shrink next year, followed by a weak recovery in 2024.

The Ulster University Economic Policy Centre (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 UK as a whole.

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

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

Interest rates were just 0.25% at the start of this year but have been raised steadily as the Bank of England has tried to get on top of soaring inflation.

Mr Hetherington said the last Bank of England monetary policy committee report included analysis that suggests inflation could fall to below its 2% target over three years, even if rates stay at 3%.

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

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