The Northern Ireland economy is expected to grow at a slower rate than previously thought.

The Northern Bank's latest quarterly report said the economy is now expected to grow only by 1% by the end of the year - a downward revision of 0.3% from its report in March.

Weak consumer demand and high levels of Government debt have been signalling a longer path to recovery, according to Northern Bank Chief Economist Angela McGowan, (pictured here).

In its latest 'Quarterly Sectoral Forecasts' report, the fragile nature of the local recovery is underlined and it is anticipated that normal economic growth may not emerge for some time.

Forecasts for 2011 show that the economy is then expected to grow by only a little more - around 1.9%, suggesting that local output will not reach the pre-recession levels again until the second half of 2012.

The report finds that overall, the local economy is expected to grow but that while some sectors will continue to perform reasonably well, others will continue to struggle.

The revised forecast figures for growth in 2010 for business services, retailing and manufacturing, which represent over a third of total economic output locally, are 1.7%, 2.9% and 0.8% respectively.

Ms McGowan said that forecasts showed that the local economy will grow slower than previously expected in 2010 highlighting subdued consumer confidence, greater fragility in the Euro area combined with impending public sector cuts and Northern Ireland’s limited local export base.

"The run up to the general election in the UK resulted in open public debates about the state of the UK's public finances and left households and business in a limbo with regard to their future financial positions.

"That sort of uncertainty has a knock on effect upon consumer spending and overall demand," she said.

The hospitality industry is however expected to grow at 3.7% over 2010 while the health sector should see reasonably good year on year growth of 3.1%.

Ms McGowan noted: "The hospitality sector could rebound this summer as a relatively weak pound should entice households to holiday at home.

"The recent disruption to the airline industry from the Icelandic ash and the unpredictability of this influence in the months ahead could also deter households from flying.

"The health sector should also hold up reasonably well as politicians appear to be determined to maintain front-line services," she explained.

Meanwhile, retail will be supported by a degree of 'pent-up demand' and some Republic of Ireland trade although the latter is fading due to the recent Euro weakening.

"While budget retailing in particular is doing well, there is also strong competition amongst retailers to encourage consumers to spend.

"The retail growth forecast is based on the assumption that the new Government will not force VAT up to 20% in an effort to raise tax revenue," she said.

Local public administration will decline at a rate of approximately 1.7% and Ms McGowan indicated that figure is a conservative estimate and could be higher if the NI Executive chooses to safeguard front-line jobs and target public administrators to meet efficiency targets.

The local construction sector is expected to further contract by -1.7% this year and some construction-related sectors such as mining and quarrying and real estate which will also struggle with year on year contractions of -7.2% and -0.5% respectively.

(BMcC/GK)