DANSKE Bank offered a more optimistic forecast for the northern economy thanks to the success of the Covid-19 vaccination program, predicting that economic activity will return to pre-pandemic levels in the second half of 2022.
Northern Ireland’s largest lender has said that while he believes the economy continued to contract in the first quarter of 2021 due to continued Covid-19 restrictions, he now believes it will rebound from 4.8 % during the rest of the year.
And he expects that growth to accelerate to 5.8% in 2022.
Danske Bank lowered its outlook for 2021 late last year, suggesting the economy could only recover by 4% this year after contracting 11% in 2020.
This represented a significant reduction from the 7% growth forecast he made for 2021 in July 2020.
But the lender is now offering a slightly more optimistic assessment.
The hardest hit sectors, such as accommodation and food services, are expected to rebound 17.6%, while the arts, entertainment and recreation sector will rebound by 11.4%.
But Danske warned that growth represents only a partial recovery for sectors, which were decimated during the pandemic.
After initially predicting that unemployment could reach 6.7% in 2021, Danske Bank revised that figure to 5% following the extension of the UK government’s leave scheme.
The total number of jobs is expected to decrease by 1.9% in 2021, before starting to grow again by 1% in 2022.
The hospitality and arts sectors are expected to experience much higher levels of unemployment in 2021.
Danske expects unemployment to rise again slightly in 2022.
The bank’s chief economist, Conor Lambe, said: âWhile we expect the unwinding of the current restrictions to be cautious, we believe that the gradual reopening of the economy will see economic output start to rise again. grow from the second quarter of 2021.
“Measures put in place by policymakers, such as the recently extended leave program, have proven to be a key source of support for the economy since the start of the pandemic and are also expected to play an important role in the recovery.”
But he warned that the job market would continue to deteriorate, with persistent high levels of uncertainty likely to cause some consumers and businesses to remain somewhat cautious in their spending decisions.
âThe coronavirus pandemic remains the most significant risk facing the economy. Considerable uncertainty still exists about the impact of the reopening of the economy on the number of coronavirus cases and the pace at which restrictions can be relaxed.
âThe emergence of new variants of the virus is also a significant risk and could impact the unwinding of restrictions, or potentially lead to restrictions to be reintroduced later in the year.
“In addition, high uncertainty related to the pandemic may lead to lower consumer and business confidence and more cautious spending and investing habits.”