New forecast for state upbeat

By Andrew Gomes
Advertiser Staff Writer

University of Hawai'i economists yesterday updated their two-year economic forecast for the state, predicting that inflation will be higher than expected and 2005 visitor arrivals will break the 6.9 million record set in 2000.

Economists Carl Bonham and Byron Gangnes of the UH Economic Research Organization also said that effects of the monthlong concrete worker strike so far shouldn't alter construction industry performance this year, though that could change if the strike is prolonged.

The report, updated quarterly, said that unemployment should be at or slightly below levels during the past three years and that inflation-adjusted income by 2005 will have increased for nine straight years.

"Hawai'i's economic expansion continues, and more strong growth is in the pipeline," the report said. "Many of the risks that concerned us last year — a precarious U.S. recovery and a more precarious Japanese one — have receded."

Bonham and Gangnes said their forecast for Honolulu inflation at 2.8 percent this year and 2.7 percent in 2005 is up from 2.3 percent last year and about 1 percent in 2001 and 2002 because rising housing prices will begin to show up in the consumer price index.

The economists predicted "impressive" year-over-year growth for Japanese visitor arrivals, but not enough to make up dismal losses since 2001.

Projected increases this year are 24.5 percent for Japanese visitors, 3.6 percent for U.S. arrivals and 8 percent for the total market, which should fall about 40,000 short of the record 6.95 million arrivals in 2000. In 2005, arrivals are projected to reach 7.18 million, for a 4 percent increase, or 2.2 percent from U.S. arrivals and 8.9 percent from Japanese arrivals.

"The worst of Japan's tourism slump is probably now behind us," the report said, also noting uncertainties of forecasting economic growth. "The ongoing security challenges in Iraq and political uncertainty of a presidential election year linger in the background. But for now, it looks like another banner year for the Hawai'i economy."

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