Hawai'i economy expected to slow

By Andrew Gomes
Advertiser Staff Writer

State economists yesterday said they expect economic growth in Hawai'i this year to be slower than previously forecast, given advancing plans for war in Iraq, consumer uncertainty and sluggish Mainland and Japan economies.

The quarterly Department of Business, Economic Development and Tourism report was released on the same day that President Bush broadcast his intent for an attack on Iraq. The report, however, does not assume the country will be at war.

Given that assumption, the state continues to expect growth in tourism, personal income and jobs this year.

"We think that we're seeing some reduction in expected visitor activity related to the heightened potential for war," said Ted Liu, director of the economic department. "However, in the long run, Hawai'i should rebound as the Mainland and Japan economies gain strength."

The state projections for economic growth revise a forecast for this year made in December. The growth predictions are in relation to a Hawai'i economy in 2002 that was still coming off depressed levels brought on by the Sept. 11, 2001, terrorist attacks.

The report predicts that 2003 visitor arrivals will increase by 5.3 percent to about 6.7 million this year, 0.8 percent less than the 6.1 percent annual growth projected three months ago.

Visitor expenditure gains are similarly expected to slow, with projected growth of 6.8 percent, down from 7.6 percent growth forecast in December.

The reductions in anticipated visitor activity were made partly based on lower-than-expected arrivals in February and earlier this month. Of the still-anticipated increase in visitor activity, much is expected from Japan, where the economy is forecast to improve gradually, the report said.

Real personal income, which accounts for anticipated inflation, is forecast to rise 1.7 percent this year, compared with a 2.4 percent gain previously projected.

The 2003 forecast for inflation as measured by the cost of goods in Honolulu is nearly unchanged at 1.8 percent, up from the previous forecast of 1.7 percent. Last year, actual inflation was 1.1 percent.

The number of wage and salary jobs this year is expected to be 566,000, or up 1.4 percent. That forecast is only 0.2 percent below the December projection for 1.6 percent growth. Last year, Hawai'i lost 2,800 jobs, a 0.5 percent reduction primarily in retailing, hotels and transportation.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.