Big trends for the coming decade but what it means for us

Description

News paper article re. major economic/geopolitical trends likely to unfold 2019-30 and particular impact on NI and UK

Subject

News paper article re. big trends over next decade

 

Article for the News Letter

 

Big trends for the next decade

Dr Esmond Birnie, Senior Economist Ulster University Business School

“Rather than making short term predictions for 2019, what might be some of the big trends during the next decade?

1. The US dominance of the world economy is over

In 2014, according to some measures, the US was overtaken by China as the world’s largest economy. Trading relations between these two superpowers will probably  worsen.

Implications for Northern Ireland/UK:

• In terms of inward investment expect much of it to come from East or South Asia. Those parts of the world will be the source of growth in tourist numbers.

• Protection of (Western) Intellectual Property against espionage coming from some Chinese companies will be a continuing challenge.

• Regardless of the final terms of Brexit, we must aim for wider global markets.

• The Trump reduction in US Federal Corporation Tax  rates decreases the mileage which could be expected from any further reductions in Corporation Tax either in NI or the rest of the UK.

   

1. Oil price volatility will continue and moving to a zero carbon economy is going to be very difficult

Over and above simple supply and demand factors, what happens will be partly determined by a geopolitical struggle for influence between Iran, Saudi Arabia and Russia. A wildcard is what might happen if/when Saudi Arabia becomes increasingly unstable?

Implications for Northern Ireland/UK

• It would be sensible to seek as much diversity as possible in sources of oil and indeed other energy sources.

• Northern Ireland should at least consider what our options might be regarding fracking.

• We cannot assume that the world oil price will necessarily be on continuous and steady upward path. That complicates the shift to non-fossil fuels.

   

1. Nationalism and populism imply a continued reaction against economic globalism

During the 1950s-90s many governments around the world were willing to submit to international agreements and rules in the hope that we could all gain by so doing, but now there is an increasing self-assertion. Trump’s “America first” exemplifies this but his policies are far from unique.

Implications for Northern Ireland/UK

• Does this mean that a post-Brexit UK could be out amongst the wolves as it tries to make free trade agreements with other countries? More hopefully, the UK could play a very valuable role in trying to reverse a global trend towards protectionism.

• During 1998-2018 there was a lot of interest from the US, EU and elsewhere in Northern Ireland. Outsiders are now much more preoccupied to be concerned by our stalled peace and political processes. Quite understandably they may feel that we need to stand on our own two feet and tackle our problems.

• Expect defence spending to rise in the UK as east-west tensions increase again. This implies higher taxation and lower consumption. The upside is it could be good news for businesses making defence equipment.

   

1. The labour market will have its challenging but we are not going back to mass unemployment

During the past decade unemployment performance in both the UK and NI was much better than expected. The demand for the unskilled will continue to decrease. As the Department for the Economy have warned, do we have enough skills to benefit from automation and artificial intelligence?

Implications for Northern Ireland/UK:

• Sectors such as manufacturing, food processing and social care will struggle to fill vacancies. This will be especially so as the tap of supply from the EU is turned down. More has to be done to draw on the economically inactive but experience suggests that will be very difficult.

   

1. Northern Ireland will continue to be one of the weakest regional economies within the UK or, indeed, Europe

The level of income per head will remain well below the UK or EU averages. There will be little or no convergence. Recent inward investment performance has been good though out-stripped by the Republic of Ireland. Much of our tech sector is not really that high productivity. The UU Economic Policy Centre forecast that NI economic growth rates over the next five years could be as low as 1% annually or less.

Implications for Northern Ireland/UK

• Any long run effect from Brexit will come on top of a longstanding and pronounced weakness.

• Brexit forces us to consider whether a “business as usual” approach to the NI economy is adequate. It is not. The problem is that whilst Brexit could increase the pressure to do some of the hard things which should have been done anyway such as trade with more distant markets, engage with economically inactive and reform support for farming, is there the will to do this?

Ends