Yes, in most cases such a baby will be healthy. However a sexual relationship between a niece and an uncle is considered to be incest. It is often illegal, even if both are adults, and is widely condemned. It is more likely to result in a child with birth defects or a genetic disease than a child of less closely related parents.
If you are male, you are great uncle to your niece's child. If you are female you are great aunt. The child is your great nephew (if it is a boy) or great niece (if it is a girl).
Your niece will call you her aunt or uncle.
Once the baby is born, you are considered to be its grand aunt or grand uncle.
uncle, niece
Your niece's children are your great nieces and great nephews, and you are their great uncle. Your uncle could be the father of your niece, and thus the grandfather of your niece's children.
A niece's son calls his uncle his uncle, just like everyone else.The niece's son calls her uncle his great uncle. He is the great uncle's great nephew.
You are her great-aunt/uncle. She is your great-niece.
You are the great-great-aunt/uncle to your niece's granddaughter. This means that your niece's granddaughter is your great-great-niece. The term "great-great" signifies that there are two generations between you and your niece's granddaughter.
You are your uncle's niece. You and your uncle's children are first cousins to each other.
The cast of Gourmet Baby - 2001 includes: Cheyenne Allenspach as The Niece at 7 Carla Dunareanu as The Niece at 12 Kay Tong Lim as The Uncle
great niece
Your nephew's baby would be your grand-nephew or grand-niece. You would be their grand-uncle or grand-aunt.