Hawai'i economy in dumps until late 2002, expert says
By John Duchemin
Advertiser Staff Writer
Hawai'i tourism could take more than a year to recover from the effects of the Sept. 11 terrorist attacks on the Mainland, and the Islands' economic growth likely will be dampened for at least that long, according to the most recent economic assessment.
In one of the first predictions based on hard data since the attacks, Paul Brewbaker, a top private forecaster and chief economist for the Bank of Hawaii, said the state should see "severe" economic losses through the end of this year and little to no growth next year as it struggles to cope with the downturn in travel after Sept. 11.
His predictions are more grim than that of some tourism operators, who have said they hope to see normal travel patterns return as early as spring 2002. State economists have estimated that, depending on the severity of the downturn through December, Hawai'i could lose 5 to 10 percent of its total visitor arrivals for this year, $492 million to $1.3 billion in gross state product and as many as 24,000 jobs.
Tourism "will probably remain 15 to 20 percent below year-earlier levels until 2002," only then gradually getting back on track. But "getting to where the economy would have been without the attacks may take more than a year or two," Brewbaker said in his report dated Oct. 25.
The report by Brewbaker — who based his estimate on more than five weeks of daily numbers, including unemployment claims and airline passengers since mid-September — is the latest indicator of the crisis shuddering through Hawai'i's economy.
The post-attack grounding of all flights, a wave of travel cancellations, plummeting retail sales and hotel occupancy, and multimillion-dollar losses have forced employers across the state to lay off thousands of employees, reduce operating hours and, in some cases, go out of business.
More than 16,000 Hawai'i residents have filed unemployment claims, many of them former tourism employees. The Legislature has entered an emergency session to debate the proper response; Gov. Ben Cayetano is pushing for hundreds of millions of dollars in construction to kick-start the economy and certain regulatory concessions to help businesses and unemployed workers.
Brewbaker did not make specific predictions for key economic numbers such as unemployment, job growth, income or gross state product. But he made it clear that the state's economic performance in those areas will be tied to the recovery of tourism.
Several economists said yesterday that they agreed with Brewbaker's general conclusions.
"We're thinking pretty much along the same lines," said Pearl Imada-Iboshi, chief economic researcher for the state Department of Business, Economic Development and Tourism.
In analyzing data after the attacks, the state's recovery from the Sept. 11 shock looks like a "reverse J," Brewbaker said. The immediate drop in tourists was followed by a small rebound, stabilizing within a few weeks — but to a level still well below the same period last year.
While tourist arrivals to Hawai'i have increased since the first week after the attacks (when arrivals were down 46.5 percent), arrivals were still off 20.7 percent in the seven days ended Oct. 17. Japanese arrivals have been even slower to rebound.
Brewbaker predicts these lower-than-normal numbers will last at least until the new year — hampered by a sharper-than-expected national recession — and tourism should return to previous levels in mid-2002. By the end of that year, growth should have returned, particularly if the U.S. economy responds to economic stimuli such as low interest rates and federal government spending, Brewbaker said.
But the rebound will probably be uneven, Brewbaker and other economists said.
The domestic travel outlook is relatively optimistic, with Mainland visitor levels on track to recover by mid-2002 — but international travel is much less certain. Japanese travel numbers are still more than 50 percent down from last year's levels, and it's unclear when they will recover.
"The way domestic numbers are recovering, it doesn't take a leap of faith before getting back to normal — but with Japan, there is no such trend," said Byron Gangnes, economics professor at University of Hawai'i. "We think full recovery of international travel will take a much longer time."
Other economists plan to issue forecasts similar to Brewbaker's report within the next few weeks.
The state is set to release its official prediction of economic growth this week. University of Hawai'i economists Carl Bonham and Gangnes also plan to release a forecast by Friday, and First Hawaiian Bank economic consultant Leroy Laney will unveil the bank's economic outlook Nov. 16.
