Northern Ireland’s fragile economy will be hit harder than that of any other UK region by Brexit, local forecasters say, as questions persist about who will replace hundreds of millions of pounds in EU funding.

Not only does Northern Ireland stand to lose about £500m a year in EU funding for farmers, voluntary groups and peace projects, its exports – 60% of which go to Europe – could suffer if tariffs are imposed on products imported from the UK.

The government has promised to match the current level of agricultural funding through to 2020, but what will happen after that is unclear.

“We will need to address the future of all programmes that are currently EU funded once we have left,” the Northern Ireland secretary, James Brokenshire, told the Guardian. “Over the coming months HMT [Her Majesty’s Treasury] will consult closely to review all EU funding schemes to ensure that any new funding commitments best serve the UK’s national interest.”

Forecasters predict that in 2017, the year when article 50 must be triggered, Northern Ireland will be the UK’s weakest performing region, with growth of just 0.2%.

The first minister, Arlene Foster, and deputy first minister, Martin McGuinness, have urged Theresa May to be mindful of the region’s unique position, pointing out that since 1984 it has benefited from £11bn of EU funding.

But the PWC chief economist Esmond Birnie said the focus on the EU funding was kicking the real problem into the long grass, and that this should be a moment for questioning whether subsidies and grants had been a good thing.

“If the NI executive is pinning its hopes on safeguarding the subsidies, it’s a mistake, it’s not realistic and it’s fairly important to have a plan B,” said Birnie. Farm subsidies, for instance, have “fossilised a sector in one period of time” with little incentive to innovate – or even leave the sector – meaning missed opportunities to grow the business or make it more dynamic, according to Birnie.

Some 38,000 farmers and rural projects shared nearly £350m from Brussels, accounting for about 70% of the region’s EU money. By output, this amounts to three times the subsidies and grants given to farmers in the rest of the UK.

Banners in the border town of Carrickcarnon. Photograph: Clodagh Kilcoyne/Reuters

Others point out that the Brussels money is dwarfed by the money London transfers to Belfast each year – a net £9bn. “The real paymaster of Northern Ireland is London, not Brussels,” said Graham Brownlow, a lecturer in economics at Queen’s University and co-editor of Irish Economic and Social History.

Some sections of the public sector economy are a vestige of the Troubles. The rail and bus services remain state owned, while the management of council homes is outsourced to a housing executive because of sectarianism.

But most of the public sector dates back to the founding of Northern Ireland in 1922 following Ireland’s war of independence.

“People have argued that the private sector is the wealth-generating sector, and the logic being that the problem is there is too much public sector, but for Northern Ireland the public sector is more a consequence of economic failure rather than its cause,” said Brownlow.

Meanwhile, Belfast’s hopes of winning an advantage over the rest of the UK, and perhaps even undercutting Ireland, by lowering corporation tax have been dashed, union officials say, because most global companies want to operate inside the EU.

Theresa May meets Arlene Foster and Martin McGuinness in Belfast in July. Photograph: Paul Mcerlane/EPA

The coalition in Belfast, led by the Democratic Unionist party and Sinn Féin, has insisted it will continue to press the UK Treasury for a local corporation tax rate in order to compete with the Irish Republic’s 12.5% rate.

But Peter Bunting, the northern secretary of the Irish Congress of Trade Unions, said it was pointless to cut corporation tax to 12.5%, or even 10%, and try to appeal to multinationals “because the rivals down the road will still have access to the single market”.

Jimmy Kelly, Unite’s regional secretary, described the power-sharing government’s continued search for a rate as low as 10% as an “unwinnable race for the bottom”.

Kelly said: “Post-Brexit it’s unclear whether the beggar-thy-neighbour approach to winning tax haven status will even bring FDI [foreign direct investment] to Northern Ireland. Will multinationals site investment in Northern Ireland where there is such uncertainty over future tariffs and access to the EU market, when there’s a low-tax EU state just 60 miles south?”