In its latest Quarterly Economic Observer, the Nevin Economic Research Institute (NERI) has said it anticipates that the economy will grow at a “reasonably robust rate” during the 2015 to 2017 period, although it says that growth will moderate year-on-year.

The NERI report says that the economy remains below its potential output level, and, driven by strong but declining employment growth, is projected to grow faster than the economy’s long-run average potential growth rate out to 2017.

Unemployment

The report says that the unemployment rate will continue to fall and projects that, by mid-2016, the number of persons unemployed will have fallen below 200,000. It says that more than two million people will be in employment by the end of next year.

Other findings in the NERI report include:

• Strong GDP growth of 3.7% in 2015, declining marginally to 3.5% in 2016
• Consumption will continue its recovery driven by rising real disposable incomes
• The strengthening economy will boost the public finances with the deficit falling to around 2.4% in 2015 and 1.8% in 2016
• Unemployment will steadily decrease out to 2016, with the 2015 figure averaging 9.7% and the 2016 figure averaging 8.9%
• Employment growth will be close to 2.2% in 2015 and 1.9% in 2016.

Budget 2016

The NERI says it rejects the Government’s proposed 50-50 split between revenue and expenditure measures in the October Budget as “inappropriate” because of “the far from optimal growth and equity implications of that split and the currently low levels of government revenue and spending,” and added that there is no scope for reducing the tax take in Budget 2016 “given the pressures on the expenditure side.”

Instead, the Institute argues that long-run economic growth, employment and equity goals can best be achieved by prioritising use of the available fiscal space to increase public capital investment levels. It also argues for a modest increase in social spending funded by a set of growth-friendly reforms to increase total government revenue.

Northern Ireland

The NERI report says that the outlook for Northern Ireland economy has weakened following the outcome of the recent general election in the UK “and the negative implications for public spending and aggregate demand.” It adds that continuing uncertainty, due to the planned referendum on the UK’s membership of the European Union, also has the potential to undermine the attractiveness of Northern Ireland as a location for foreign direct investment.

The full report is available to download HERE.