Northern Ireland economic growth fell to 1.9 per cent in 1998 from 3.6 per cent in 1997, while redundancies increased and GDP per capita fell in relative terms, according to a report published this morning. The annual economic survey by PriceWaterhouseCoopers (PWC) says growth for 1999 could be as low as zero, and might recover only to 1 per cent in 2000.

The document also warns that the North's proposed new administration will have to show economic leadership, or risk a vacuum developing. If the politicians do take control of the economy, however, the long-term prognosis is very good, it adds.

Northern Ireland's economy was dragged lower by a world slowdown, the crisis in Asia, and sluggish demand in the euro zone for its exports, PWC says. With a third of all Northern Irish exports going to the depressed British market, the immediate future does not seem bright.

Despite the slowdown, some sectors performed well in 1998, the report adds, including engineering and chemical manufacturing, as well as hotels and restaurants and financial services.

PWC economist Mr Philip McDonagh said the report comes in the context of continued heavy dependence by Northern Ireland on Britain. The North benefits from an annual subsidy, not including the British army, of £4 billion sterling (€5.98 billion) - the equivalent of £8,000 sterling (€11,950) per household. At least 200,000 of the economy's 600,000 employees work directly for the state, with a further 33,000 in the state-subsidised voluntary sector. Public expenditure represents 60 per cent of GDP.

"It is essential in the current economic climate to have clear direction and control of the economy," said Mr Stephen Kingon of PCW. "The Assembly has not yet taken over the reins of government, and when it does, it will inherit an economy on a rapid downswing while the learning curve in government and economic management will be understandably steep.

"If the current delicate political process is prolonged, the existing Northern Ireland Office ministers may defer vital policy decisions to a future Executive," he added. "Whatever the political outcome, we must avoid future economic plans being suffocated in a a management vacuum."