Danske Bank downgrades predictions for economy

JOB numbers are tipped to shrink by 3% this year as economic recovery stalls due to growing Covid-19 cases and a new lockdown, a report reveals today.

The quarterly report by Danske Bank said that as a result of the worsening picture, it had downgraded predicti ons of growth in the economy for 2021 from 7% to 4%. That follows a contraction of 11% during 2020.

And while the rollout of vaccinations could bring gradual recovery in the second half of the year, it would be “a number of years” before output returns to pre-pandemic levels.

Danske Bank chief economist Conor Lambe said: “The economic recovery is expected to have stalled in the fourth quarter of 2020 as higher numbers of Covid-19 cases led to the introduction of more stringent coronavirus restrictions.

“With a further six-week period of restrictions coming into effect in late December 2020 and expected to be in place until at least the first week of February, the economy is also likely to experience a challenging first quarter of 2021.

“The rollout of the coronavirus vaccine programme will hopefully allow restrictions to be gradually eased as we move through 2021, with the economic recovery getting back under way from the second quarter of the year. However, we still expect economic output to be below its pre-coronavirus level in the final quarter of the year.”

Danske Bank predicted that the average number of jobs will fall by 3%, following a projected decline of 0.3% in 2020. It expects the unemployment rate to increase to an annual average of 6.7% in 2021, peaking at around 7% in the second quarter.

Mr Lambe added that trade frictions arising from the NI Protocol, and the implementation of the UK-EU Trade and Cooperation Agreement, would not help the pace of recovery.

“Firms across the UK will need time to adapt to these changes, which will act as a drag on the pace of economic growth,” he added.

He said sectors such as the arts, accommodation and food, which had greater reliance on contact with the public, would see a rise in output of 17%, assuming the vaccine rollout permitted restrictions to be lifted.

But sectors such as professional, scientific and technical services and information and communication, where people and businesses have been able to adapt to remote working, were projected to have experienced less striking falls in output in 2020.

Such sectors are tipped for growth of up to 4.5% in 2021.