Posted on: Saturday, December 20, 2003

Economic forecast for state grows rosier

By Deborah Adamson
Advertiser Staff Writer

Hawai'i's economy grew faster than expected this year, and should continue its heated pace through 2004 as a broad-based recovery continues and tourism shakes off the effects of the Iraq war and SARS, state officials reported yesterday.

The state Department of Business, Economic Development and Tourism revised its estimates upward for most key economic indicators. And while growth forecasts for tourism were taken down a peg, they remain robust despite a slow Japanese market.

"The state has done very well in coming back through some of the adversities in the visitor industry in 2003," said Pearl Imada Iboshi, state chief economist. "In 2004, we expect everything to be doing well."

Hawai'i's real gross state product — the value of all goods and services produced in the state, after inflation — is expected to have grown by 2.9 percent in 2003 and 2.8 percent next year. A key measure of economic activity, it was forecast previously at 2.6 percent and 1.8 percent, respectively.

Personal income should increase by 5.5 percent next year, up from an estimated 5.4 percent this year. The last times growth rates hit such levels were in 2000 and 2002 — and in 1992 before that, Imada Iboshi said.

Previous estimates for personal income growth were 4 percent in 2004 and 4.6 percent in 2003. After deducting inflation, growth is expected at 3.4 percent for 2004 and 3.5 percent for 2003, up from the September forecast of 2.1 percent and 2.7 percent.

Personal income reflects money received from wages, unemployment and welfare benefits, Social Security payments and income from rentals, self-employment, interest and dividends. It's the biggest component of the GSP.

Hawai'i should see job growth of 2 percent next year — revised from 1.3 percent — and end this year up 2.2 percent, instead of 2.1 percent, as previously forecast.

Gains should be broad-based, led by construction and tourism, which would add to job rolls, Imada Iboshi said.

The state expects visitor arrivals to rise by 6 percent next year, down from the previous forecast of 6.3 percent. Visitor spending should rise by 7.5 percent in 2004, down from the 7.8 percent estimate. But the new forecast for visitor days — how long visitors stay — was bumped up to 5.1 percent from 4.9 percent.

For 2003, visitor arrivals should fall by 0.6 percent, apparently reflecting the dual effect of the onset of SARS and the Iraq war. Visitor spending is expected to rise 4.8 percent and visitor days 3.8 percent.

Inflation should be 2 percent next year, up from 1.8 percent this year, as housing costs rise. But inflation remains at historically low levels.

The DBEDT also said bankruptcies in the state fell by 19.2 percent in the third quarter over the same quarter a year ago.

Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.