Non-tourism businesses may sustain state in '03, economists say

By John Duchemin
Advertiser Staff Writer

Despite a drop in tourism caused by the war in Iraq, University of Hawai'i economists predict the state's economy will grow in 2003.

Job counts and income will likely increase moderately this year, and unemployment should drop even though visitor arrivals are expected to fall, said economists with the University of Hawai'i Economic Research Organization in a report released yesterday.

"The local economy continues to show resilience," said professors Carl Bonham and Byron Gangnes in the report. "While there is certain to be fallout from the worsening visitor situation, local sources of strength will continue to propel the economy forward."

Gangnes and Bonham predict a 1.3 percent drop in visitor arrivals in 2003, but overall economic growth to be fueled by non-tourism growth, particularly in housing and construction. Total state personal income is expected to rise 3.2 percent this year.

It's a similar economic picture to 2002, when non-tourism businesses sustained the state even as tourism struggled following the Sept. 11 terrorist attacks.

The forecast decline in 2003 visitor numbers is a sharp downward revision of an earlier forecast calling for moderate growth. The revision was made necessary by wartime jitters, which have caused travel levels to fall, particularly from Japan, Bonham and Gangnes said. The outbreak of severe acute respiratory syndrome, or SARS, has also depressed travel, the economists said.

The extended rough spell for tourism has held tourism-related jobs to levels well below their peaks. But on the positive side, construction jobs are up 9 percent in the first two months of the year, an indication that low interest rates will likely spur further homebuilding and construction projects.

Reach John Duchemin at jduchemin@honoluluadvertiser.com or at 525-8062.