BELFAST BRIEFING:NORTHERN IRELAND is in much better economic shape than it realises but is in danger of talking itself into a recession, according to one of the North's leading economic commentators.
Michael Smyth, the University of Ulster's economic guru, believes the North can rely on being insulated to a degree from some of the worst effects of the global economic downturn.
Smyth says Northern Ireland has the benefit of a public-sector-driven economy to cushion it from the worst effects of the credit crunch and global slowdown. New research shows British taxpayers have subsidised public-sector spending in the North by an estimated £57 billion (€71.8 billion) since 1985/1986.
The research shows that, in terms of the amount of money allocated by the UK treasury, public spending per head in the North is £2,254 higher than in England.
Smyth warns that public expenditure growth will slow in Northern Ireland over the next three years.
But he believes that, in the meantime, the Northern Ireland Executive's current budget programme and investment strategy should help offset some of the weaknesses in the private sector over the next 18 months.
Smyth is not from the "close your eyes and everything will be fine" school of economics. He acknowledges that there are major problems in the North and the current economic climate is grim.
In the latest First Trust Bank Economic Outlook and Business Review, published today, Smyth says: "The pervading sentiment in the Northern Ireland economy is one of doom."
He states: "The Northern Ireland housing bubble is still bursting and the construction industry is under pressure."
In Smyth's opinion, the North's private sector is also besieged by a range of "adverse developments".
Smyth says consumer confidence has been badly damaged and is unlikely to show any signs of recovery until 2009.
He believes one of the biggest impacts on consumer confidence has been the "unremitting media coverage of recent economic turmoil".
Smyth is highly critical of some of the media messages.
"Comparisons with the 1980-1983 deep recession or the Great Depression of the 1930s have been made in a very irresponsible manner. 'If you say it loud enough and often enough they will believe you' was one of Mrs Thatcher's favourite sayings," he says.
"Consumers in ever greater numbers have decided not to change their car, not to buy a new kitchen or not to replace the fridge-freezer or TV. They have certainly decided not to move house."
According to Smyth, this is because they are gripped by increasing uncertainty and by weakening confidence. But whatever stance Smyth may take, certain facts cannot be ignored. New economic research shows there was another sharp downturn in the North's economy last month.
The Ulster Bank Northern Ireland PMI report for August produced further evidence that economic conditions were continuing to deteriorate.
Richard Ramsey, Northern Ireland economist with Ulster Bank, said the number of new orders fell for a ninth consecutive month during August.
He said there was a particularly sharp drop in the level of new orders recorded in the manufacturing, construction and retail sectors.
Ramsey said anecdotal evidence linked "depressed demand conditions" to weakening economic sentiment, a falling housing market and the reduced availability of credit.
Some of this anecdotal evidence includes the fact that the car sales market - always a good indicator of how the local economy is performing - has slowed dramatically.
Smyth is right in his assertion that public expenditure "will safeguard living standards and jobs for hundreds and thousands of people in Northern Ireland".
But in a climate where costs continue to spiral out of control - electricity prices are set to rise by 33.3 per cent and Phoenix Natural Gas is to increase prices by 19.2 per cent - only an optimist could believe Northern Ireland is going to escape the worst of this economic slowdown.
