NORTHERN Ireland may be facing a 'perfect storm' of economic turbulence following a prolonged period of growth and economic good times, delegates at the 13th annual Northern Ireland Economic Conference were told last week.

The one-day event, sponsored by PriceWaterhouseCoopers and supported by Invest NI and InterTrade Ireland, was dominated by talk of the credit crunch and the crisis in the world's markets.

Speakers ranged from deputy First Minister Martin McGuinness, who told delegates the Executive was "actively addressing the credit crunch", particularly its impact on lower income families, to Adrian Cooper, managing director of Oxford Economics, who suggested that businesses and consumers in Northern Ireland were not well prepared for the downturn.

In his presentation, Philip McDonagh, chief economist of PriceWaterhouseCoopers, mulled whether Northern Ireland's economy faced a 'perfect storm', the ingredients of which were the collapse of the US sub-prime market, rising oil prices fuelled by growing demand in India and China, and a 60% increase in food prices.

Those ingredients had added up to recession in the Republic and US, worldwide consumer price inflation of 5% - up from 2% - and US growth for this year of just 0.7%.

Recovery from the crisis, which has claimed the high profile scalps of Lehman Brothers, Merrill Lynch, Northern Rock, Bradford and Bingley and Bear Sterns among others - was not expected till 2010.

Mr McDonagh gave his audience a trip down memory lane, reminding it that economic times just past had been pretty good: 25 years of unbroken unemployment growth with almost 100,000 jobs in construction, retail, catering/hospitality and business services created in the last decade. Conversely, the same period saw 24,000 jobs lost in manufacturing and agriculture.

But the traditional drivers of growth - investment, consumer spending, public expenditure and exports - were all slowing down.

Construction output was taking a dive and employment in the sector was also falling, with employment in house building alone falling by nearly 50%.

The average number of unsold dwellings was up nearly 65% since last year.

Meanwhile, eight out of 12 infrastructure construction companies surveyed - most of which had more than 100 direct employees - were regularly sending up to 50 employees to work on construction projects outside Northern Ireland.

The average employment in those 12 companies was expected to fall by 50% in the next year.

Consumer spending had also suffered. Employment in retail has risen steadily in the last 12 years, though mostly in part-time employment - but output in the sector had fallen steadily since the second quarter of last year.

Car registrations also fell in the first quarter of this year. Fuel and light were costing 25% more while food was up by around 13%. Motoring expenditure was up 5%.

Unsurprisingly, poorer households were hardest hit and forced to spend the biggest proportion of their income on living costs.

Public spending was also slowing down.

As for the consequences of the change, Mr McDonagh said he expected the economic landscape to change, for example, with changed rules for the financial sector.

He added that the new financial world order made some of our economic targets a bit more daunting - such as halving the UK private sector productivity gap by 2015 and increasing the employment rate from 70% to 75% by 2020.

As for what action to take, intensifying the roll-out of the investment strategy, developing infrastructure, driving for greater efficiency in the public sector, growing the private sector, and political leadership and action were all musts.

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