Economic outlook upbeat
By John Duchemin
Advertiser Staff Writer
Signs of improvement in key sectors show that Hawai'i probably has emerged from a mild recession, and a further rebound is likely the remainder of this year, a new University of Hawai'i forecast suggests.
UH economists Carl Bonham and Byron Gangnes say that growth appears to be returning faster than expected, thanks to factors including a surprisingly strong U.S. recovery from the shock of the Sept. 11 attacks and unexpectedly mild tourism job losses.
"Recovery is now under way, in fact proceeding a bit faster than we envisioned," the economists said in the report issued yesterday.
Bonham, Gangnes and several other local economists have said Hawai'i has been in a recession since the Sept. 11 attacks completely disrupted the visitor industry for several days and caused a severe slowdown in arrivals for the next several months.
They continue to predict a gradual recovery, with visitor numbers returning to earlier peaks by 2003 or later.
The latest UH forecast concurs with other economists' conclusions, said Pearl Imada-Iboshi, director of economic research for the state Department of Business, Economic Development and Tourism.
"We also see that things have improved faster than expected, especially in terms of jobs and in the number of visitors from the U.S. Mainland," Imada-Iboshi said. DBEDT recently increased its own projections for economic growth.
Bonham and Gangnes moderated their earlier forecast, made in November 2001, that called for sharp declines this year in many key indicators, followed by strong growth in 2003.
The new forecast calls for Hawai'i to experience stronger results this year, but less growth next year.
But the report cautions that Japan's economy still is in woeful condition following three straight quarters of recession, and will continue to weigh on Hawai'i's economy. Japanese travelers remain a key component of the visitor industry, and steep drops in their numbers since September have hurt retailers and hotels in Waikiki that relied on Japan. Daily Japanese visitor numbers are fluctuating between 70 percent and 90 percent of previous year's levels.
"If anything, our outlook for Japan has worsened since November, and while the bottom may have been reached, signs of recovery remain elusive," the economists said.
Gangnes and Bonham's latest predictions for several key indicators include:
• A 3 percent growth in visitor arrivals this year, followed by a 6.4 percent increase in 2003. Earlier, the economists had predicted 2.0 percent growth this year and a 7.4 percent rise next year.
U.S. visitor arrivals, which fell 4.1 percent in 2001, are forecast to grow 4.3 percent this year and 3.5 percent next year, while Japanese visitors, after an 18.8 percent drop last year, are forecast to rise 0.2 percent in 2002 and 12.0 percent in 2003.
• A 0.5 percent growth in inflation-adjusted personal income in 2002, followed by a 2.1 percent rise in 2003. Personal income had risen at about 2.3 percent per year in 2000 and 2001.
• A 0.3 percent decline in payroll jobs in 2002, followed by a 1.9 percent increase in 2003. Jobs are expected to decline this year because visitor industry employers laid off thousands of workers after Sept. 11 and haven't hired everyone back.
• Unemployment of 4.5 percent in 2002 and 4.3 percent in 2003. Those numbers are down from the earlier forecast, which called for unemployment of 5.5 percent this year and 5.4 percent next year, as job losses have been milder than Gangnes and Bonham expected.
• Inflation of 1.0 percent in 2002 and 2.1 percent in 2003 — higher levels than initially forecast. A stronger economic recovery will boost prices, the economists predict.
Reach Advertiser staff writer John Duchemin by e-mail at jduchemin@honoluluadvertiser.com or by phone at 525-8062.
