Weaker economy forecast
By Greg Wiles
Advertiser Staff Writer
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The state's economy will weaken a little more this year than previously expected given a proposed furlough for state workers and fewer visitors because of the H1N1 flu worries.
An updated forecast from the University of Hawai'i Economic Research Organization has little in the way of good news for the state, though one of its authors believes it could mark the end of downward forecast revisions made during the past year.
"It's not getting as bad as fast as it was," said Carl Bonham, UHERO executive director.
"I think barring a dramatic worsening in the fiscal situation that we are pretty near the bottom of our downward forecast revisions."
UHERO issues updated economic projections for Hawai'i every three months, and in the past year has had to lower its expectations each quarter. The current forecast calls attention to Gov. Linda Lingle's proposed three-days-a-month furlough for state workers and the hits tourism is taking because Japanese travelers aren't vacationing as much because of the swine flu outbreak.
It projects larger declines in visitor arrivals, jobs and personal income. It also includes upward revisions to unemployment.
"I thought we were going to leave our forecast the same, but the size of the fiscal crisis and the flu virus derailed that," Bonham said. "If it weren't for those two events, we wouldn't have been lowering our forecast so much."
He said he included Lingle's proposed furlough program given that most options for solving the state's budget shortfall have similar outcomes on the economy. The furlough program will hurt personal income and lead to additional private sector job and income losses, as state workers cut back spending, UHERO's report said.
The revised forecast includes:
UHERO forecast Japanese counts will drop 13.8 percent this year, or 3.6 percentage points lower than it previously expected.
U.S. visitors will be off by 3.2 percent, or a slight improvement from 3.3 percent in the March projections.
"That's a fair number of people," Bonham said.
Next year, it will rise to 8.1 percent. UHERO had previously thought the 2010 unemployment average would be 7.6 percent.
In its March forecast, UHERO had estimated a 2.5 percent drop in 2009 and minus 0.2 percent in 2010.
UHERO noted that it appears the worst of the downturn for the U.S. and Japanese economies that feed Hawai'i's economy appears to be over.
But it noted such "green shoots" that are talked about for the bigger economies are more difficult to find here.
"We continue to expect the Hawai'i economy to have stabilized by the end of the year," UHERO's report said.
"But it remains difficult to see where a robust recovery might come from."
