EY Economic Eye Winter 2014

Economic Eye

Winter Forecast 2015

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Differing dynamics in the island of Ireland's economic performance

As 2015 comes to a close, ROI’s economic recovery continues with vigour.

As with 2014, growth is set to outpace all other Eurozone member states, and the recovery’s deepening is seen across a number of metrics, from retail to investment; from the high street to the boardroom.

While 2015 is also set to show increased economic activity in NI, growth north of the border is more muted as austerity and less favourable economic conditions dampen performance.

This Economic Eye is one of contrasts. Having tracked the recovery over past issues, we delve deeper into some of the underlying dynamics at play in the island economy. These include contrasts between ROI and NI economies’ performance and outlook, the fortunes of ROI’s construction industry during the crisis and today, and the economic recovery in the island’s main cities and regions.

Robust GDP growth in ROI …

The pace of economic recovery has picked-up in ROI in 2015. In Q2 alone, GDP expanded by almost 2%. Economic Eye forecasts an overall outturn growth of 5.8%, a significant upgrade from the Summer (1.8Mb, June 2015). On top of growth of 1.4% in 2013 and 5.2% last year, this expansion rate is all the more noteworthy.

Throughout the crisis, one of the few beacons of light for the Irish economy was the export sector’s performance.

This was driven by life sciences and ICT, with US, UK and Eurozone markets dominating. Net trade held up particularly well, providing some stability in the face of a crash in domestic demand.

Late, household consumption began to emerge from the recession, showing consumers finally feeling overall growth, and the end of austerity taking effect.

In line with this rebalancing, Economic Eye forecasts that ROI growth will be evenly composed of domestic demand and net exports over the medium term.

Contrasts with more modest improvements in NI

Recovery is continuing in NI too, with data showing economic output grew 1.3% in the year to Q2.

Over the same period, NI exports increased marginally by 0.7%, but this should be seen in light of a 2.6% overall decline in UK exports. Jobs growth was also robust.

A central theme of Economic Eye Summer (1.8Mb, June 2015) was the remarkable performance of the island – and in particular ROI – economy in 2014, and this issue sees this carrying into 2015, with a range of indicators illustrating the ongoing recovery.

A region apart?

In the same way that ROI’s growth is outpacing NI’s, a gap is emerging between the island’s major population centres and its more rural areas.

Internationally, cities are increasingly being recognised as the centres of economic development, and city regions have been more resilient in getting over the recession. By their nature, cities attract talent and investment, and can reap the rewards of first-rate infrastructure and cluster dynamics in a way regional areas cannot.

High level data for the island economy – and London for illustration – show Belfast and Dublin’s economic domination.

This issue of Economic Eye assesses the regional trends weaving through the all-island economy, as a parallel element of contrast to the difference between the overall ROI and NI economies.