Transcript Economic Scene

Economic Scene
Angela McGowan
Chief Economist, Danske Bank UK
Date: Feb 2013
Global Scenarios: the tide is turning
GLOBAL RECOVERY: Global economy to recover in 2013 as policy uncertainty
fades and global policy stimulus has become stronger.
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GDP to rise 3.8% in 2013 after 3.3% in 2012.
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Emerging markets are expected to recover from a two-year slump, which will be an
important impetus for global demand.
Fiscal policy
tight credit in the euro area and low wage growth in advanced economies
should keep the global recovery moderate.
Headwinds – expected to ease / US Budget agreements should be
resolved.
We expect a low volatility environment – commitments from US Fed and also commitments
from ECB will help.
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“The current situation can be summarized like
this: we have disappointing hard data from the
end of last year, some more encouraging soft
data in the recent past and growing investor
confidence in the future”.
Olli Rehn, EU Economic Affairs Commissioner
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Closer to home the picture not so rosy...
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US and Emerging markets showing relatively
strong recovery but..
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UK and many European economies are
struggling with the austerity route.
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IMF has warned that the austerity choking
growth.
(should be a marathon not a sprint)
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Coalition failing to meet its targets.....
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Financial crisis and recession have led to big
rise in the UK’s public sector debt and a
weakened economy.
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Government strategy called into question as
UK loses its AAA rating.
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Northern Ireland’s new composite index for the economy.
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The data suggest that the NI economy
has contracted by 6% since outset of
recession and lost approximately 50,000
jobs
(mostly construction and retail)
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GDP recent annual growth and forecasts …
Annual growth (GDP) %
UK
NI
ROI
2009
-3.9
-5.2
-5.5
2010
1.9
1.4
-0.7
2011
1.5
0.5
1.5
2012 forecast
0.0
-0.8
0.8
2013 forecast
1.0
0.4
1.5
Source: Oxford Economics; ONS, CSO and Central bank of Ireland
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But some sectors in NI will perform better than others...
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NI’s Labour market:
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Labour market expected to shrink
further over this year before modest
growth returns in the latter half of
2014.
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Further shedding of jobs in public
sector expected in 2013 and 2014
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While employment shrinks unemployment will rise
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N.B NI’s headline unemployment
data could be pushed higher this
year
– as reform of Welfare Benefits will
result in DLA & incapacity
claimants moving on to the
unemployment register.
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Will welfare reform impact?
Benefit claimants per 1000 working age people, UK regions, 2011
Claimants per 1000 working age
population
IB
ESA
DLA
IS
JSA
NI Claimants
51900
24400
184200
82800
59900
NI
46
22
165
74
54
UK
49
19
87
45
39
Source: DWP & DSD
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Various influences on GDP in the months ahead
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Inflation : looking to stay above target for next two years
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Any positives?
Consumer confidence has been improving
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Households continuing to reduce debt
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Housing market starting to stabilise
Depreciated pound – double edged sword – good for exports, but impacts on inflation
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Confidence has also been hit and remains low...but is
slowly showing improvement...
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Households repairing balance sheets – rise in savings due
to uncertainty - but causes fall in aggregate demand....
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But UK household balance sheets steadily improving...
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“Signs of Price Stability in NI Housing Market”…
Source: UU Survey Feb 2013
DFP: Residential House Price
Survey, Published February 2013

Transactions up 20% Q4
year on year

Around 3,700 verified
residential properties sold
in Q4

Residential property prices
are now 13% lower than
Q1 2005 and less than half
of the peak value of the
housing market in Q3 2007
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But: NI ‘Big-ticket’ items are still struggling...

New cars down by 1% in
Quarter 2 relative to one
year ago
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This is the eighth
consecutive quarter to
show a year on year
decrease
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Substitution happening Rail journeys up 10% year
on year
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NI had structural problems even before the financial crisis
in 2008. Local economic policy now addressing the
following...

Structural imbalance
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Lack of export focus
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Inactivity levels – 26.9% which
is significantly higher than UK
average 22.4%
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LTU and Youth Unemployment
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Skills – do skill match future
economic requirements?
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Challenges
Greater environmental awareness – increasing demand for
sustainable solutions
Waste management European WEEE (Waste Electrical and
Electronic Equipment) Directive
Input costs: Energy and other input costs – fluctuations
Exchange rate fluctuations
(buying inputs or receiving overseas payments)
– let the bank help!
Distribution - transport costs rising and falling with oil prices
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But what about Polymers industry specifically?
Opportunities
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Polymer science and technology – exponential expansion in last 2 decades
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Engaging in higher levels of R&D and innovation -Uncovering all R&D tax credit opportunities
available. /Innovation grants from Invest NI - £10,000
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Greater collaboration with universities
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Growing opportunities with Life Sciences / Pharmaceutical Industries / Renewable Energy
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Greater collaboration with Bio-medical engineering sector – fastest growing sector in RoI – new
materials constantly required for medical related applications
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NETWORK with different industries...
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https://www.connect.innovateuk.org
The event will be of interest to researchers looking at new
materials medicine related applications and industry
representatives who are already working in this sector or who are
looking to break into this sector.
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Reports available at www. @ danskebank.co.uk/economy
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