Northern Ireland economy remains resilient despite mounting global pressures

 

 

Bank of Ireland’s latest UK Economic Outlook shows that Northern Ireland’s economy continued to grow strongly in early 2026, with economic activity rising by 3.6% year-on-year and 0.7% quarter-on-quarter in the first quarter, according to the latest Composite Economic Indicator.

However, growth is expected to moderate during the second half of the year as businesses contend with higher energy costs, geopolitical uncertainty and softer business confidence.

The latest Bank of Ireland UK Economic Outlook highlights that Northern Ireland has enjoyed a strong run over the past two years, outperforming the wider UK economy, but recent survey evidence suggests activity and new orders weakened during the second quarter as global pressures increasingly weigh on businesses and consumers.

While growth is forecast to continue, Bank of Ireland expects the pace of expansion to slow in the coming months before improving again during 2027 as economic conditions stabilise.

Conall Mac Coille, Group Chief Economist, Bank of Ireland, said:

“Northern Ireland’s economy has performed strongly over recent years and continues to compare favourably with many other parts of the UK. However, businesses are operating in an increasingly uncertain environment, with higher energy costs and global geopolitical tensions creating real challenges.

The latest data suggests that economic activity remains resilient, but momentum is beginning to ease after a prolonged period of strong growth. While we expect some moderation in activity over the remainder of 2026, Northern Ireland enters this period from a position of relative strength, supported by a resilient labour market, healthy levels of economic activity and a housing market that continues to hold up well. These strengths should help the region navigate the challenges ahead.”

Across the UK, Bank of Ireland forecasts GDP growth of 0.9% in 2026 and 1.1% in 2027, with inflation expected to average 3.1% this year before easing to 2.5% next year. The Bank of England is expected to keep interest rates on hold for the remainder of 2026 before easing during 2027.

The latest outlook identifies ongoing tensions in the Middle East and elevated energy prices as the principal risks facing both the UK and Northern Ireland economies. While these factors are expected to weigh on growth in the near term, economic conditions are forecast to improve gradually as inflationary pressures ease and confidence recovers.

Conn Creedon, Senior Economist, Bank of Ireland, said:

“The new Prime Minister and Chancellor must grapple with domestic challenges including sluggish growth and strained public finances amidst heightened geopolitical risks.”