NI Economy Likely Contracted In Q1 But Vaccine Rollout And Prospect Of Restrictions Lifting Offers Hope For Growth In 2021


Northern Ireland’s economy is likely to grow again from the second quarter of 2021 onwards after an expected contraction in the first quarter of the year because of ongoing coronavirus restrictions, according to new forecasts released today by Danske Bank.

In its latest Northern Ireland Quarterly Sectoral Forecasts report the Bank forecasts that the Northern Ireland economy will grow by 4.8% in 2021 and 5.8% in 2022, with overall economic activity expected to return to its pre-pandemic level in the second half of next year.

Danske Bank Chief Economist, Conor Lambe, said:

“Strict coronavirus restrictions have been in place in Northern Ireland since the end of 2020 and, as such, we believe that the economy will have contracted in 2021 Q1. However, coronavirus case numbers have reduced significantly and the rollout of the vaccine programme has progressed well. While we expect the unwinding of the current restrictions to proceed cautiously, we think that the gradual reopening of the economy will see economic output begin to grow again from the second quarter of 2021 onwards.

“Measures put in place by policymakers, such as the recently extended Furlough scheme, 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.

“However, the labour market is still expected to deteriorate this year and the continued high levels of uncertainty are likely to lead some consumers and businesses to remain somewhat cautious with regards to their spending decisions over the coming months.”


Consumer focused sectors including accommodation & food services (17.6%) and arts, entertainment & recreation (11.4%) are expected to experience the fastest rates of growth in 2021 as the restrictions, which have been concentrated in these sectors, are gradually eased. However, it is important to note that this growth is against the backdrop of these sectors experiencing the largest falls in 2020 and the strong expansion projected in 2021 equates to only a partial recovery relative to pre-pandemic activity levels.

The wholesale & retail trade sector is projected to see a rise in output of around 4.4% in 2021. Similar to the other consumer-focused industries, the restrictions during the first quarter are likely to have led to a contraction in activity levels. However, the continued operation of essential retail businesses and the shift to online shopping have provided some support to this sector.

The manufacturing and construction sectors are projected to grow by about 5.7% and 6.7% respectively in 2021. These relatively strong growth rates are in part due to the fact that these sectors have been largely able to continue operating throughout the most recent lockdown period. The super-deduction, announced as part of the March 2021 Budget, may also lead some firms to bring forward investment and provide some additional demand to these industries.

The professional, scientific & technical services and information and communication sectors, which have avoided the worst of the output declines as people and businesses have been more able to adapt to remote working, are both expected to grow by around 4.6% this year.


Government policy measures have helped to limit job losses since the beginning of the pandemic, with the extension of the Furlough scheme until September 2021expected to continue supporting the labour market. However, despite the extensive support in place, the labour market has continued to weaken and the Bank expects further job losses to occur this year as the full labour market impacts of the pandemic begin to materialise. Overall Danske Bank is forecasting that the annual average number of employee jobs in Northern Ireland will decline by 1.9% in 2021, before returning to growth of around 1.0% in 2022.

With the Furlough scheme expected to end in September 2021, and recognising that trends in the labour market tend to lag slightly behind that of economic output, the sharpest job losses are expected to occur in the consumer-focused sectors that have been most impacted by the lockdown restrictions. Danske Bank believes that the arts, entertainment & recreation and the accommodation & food services sectors could see falls in employment of around 6.5% and 6.2% respectively in 2021.

The administrative & support services sector is also expected to experience relatively high job losses with average employment forecast to fall by 3.4% in 2021. Other business services sectors, including professional, scientific & technical services and information & communication are projected to experience more modest declines of around 1.4% and 0.3% respectively. 


Conor Lambe said: The coronavirus pandemic remains the most significant risk facing the economy. Considerable uncertainty still exists around how the re-opening of the economy will impact coronavirus case numbers and the pace at which the restrictions can be eased. The emergence of new variants of the virus is also a significant risk and could impact the unwinding of the restrictions, or potentially lead to restrictions needing to be reintroduced later in the year. In addition, high uncertainty related to the pandemic may lead to weaker consumer and business confidence and more precautionary spending and investment habits.”


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