NORTHERN IRELAND is beginning to emerge from the worst ravages of the recession as the pace of the decline in the local property market slows according to one of the North’s top economists.

Richard Ramsey, Ulster Bank’s Northern Ireland economist, believes the “very worst of the downturn” is behind the North but he is also warning the economy will contract by around 4 per cent this year.

Mr Ramsey said key indicators, such as the UK Purchasing Managers Index, show the pace of the contraction in the economy is slowing and the North can expect to return to “modest growth” in 2010.

But he says that while there may be some relief for certain sectors there are few positive implications elsewhere. He has predicted that unemployment in the North will rise to about 8 per cent by the close of 2009 and could average 9 per cent next year.

Mr Ramsey added: “While the pace of decline in output has eased in property related sectors it has intensified in those areas most sensitive to consumer demand.

“The influx of shoppers from the Republic of Ireland has failed to halt the decline in output within the Wholesale Retail Distribution sector which recorded its sixth consecutive quarter of decline in Quarter 4 2008.”

He also believes exchange rate movements have failed to protect the tourist sector from falling demand and the North’s manufacturing sector remains under extreme pressure.

“The most worrying development has been the deteriorating performance and outlook for the local engineering sector.

“We had been led to believe that our local aerospace industry would be immune from the downturn due to its involvement in niche markets. Unfortunately, this has not proven to be the case with Bombardier announcing 1,000 redundancies last month. This will have a negative knock-on effect on Northern Ireland’s extensive aerospace supply chain and manufacturing employment,” Mr Ramsey has warned.

He said the impact of the cuts by the UK Government could wipe £200 million off Northern Ireland budgets from 2011.

In a separate study Bank of Ireland says new research shows the North’s small business sector appears “resilient” despite the general downturn. The bank has reported that in the last 12 months more than 1,400 businesses, which employ more than 3,000 people, have signed up for its business package which supports new and established firms.