State in for another
lean year—economist

Leroy Laney of First Hawaiian Bank
forecasts 1 percent growth
next year

By Rick Daysog
Star-Bulletin

Hawaii's economy is heading toward its eighth lean year, as the tourism and construction industries continue to struggle.

First Hawaiian Bank's Chief Economist Leroy Laney, speaking at the bank's 28th annual business outlook forum this morning at Dole Cannery, said he expects the state's gross product -- one of the widest measures of the isles' economic activity -- to grow by an inflation-adjusted 1 percent next year, following less than 1 percent growth this year and last.

"It's been clear for some time now that Hawaii's economy is in more than just a typical slump," Laney said. "Hawaii's slide hasn't been as deep as most regional recessions. But weakness has gone on much longer than a typical regional downturn."

Hawaii's tourism arrivals have been one of the major disappointments. The statewide visitor count is down nearly 1 percent from last year while the number of visitor-days -- the amount of time tourists stay -- has dropped 1.9 percent from 1996.

The construction industry has been another weak point. While the value of construction projects completed last year rose about 2.7 percent from 1995, it's down about 13 percent this year, Laney said. If construction continues at this pace, it will match the industry's worst performance in the last four weak years, he said.

This all translates into fewer jobs.

Laney expects job growth to be flat this year before increasing a mild 0.2 percent next year, following four years of decline.

The one bright spot: inflation. Hawaii's consumer price index -- which measures the increase in prices of a basket of goods -- has grown at its slowest rate since the early 1960s. During the past 12 months, Hawaii's inflation rate has been less than 1 percent, which is nearly 2 percentage points below the national rate.

Laney partly blames Hawaii's economic woes on inefficiencies brought on by the fat years of the 1980s and early 1990s. During the boom times, people investing in Hawaii were making so much money that they could afford to ignore them, he said.

Now that Hawaii's economy is stuck in low gear, the business climate needs a major tune up. That way, isle leaders will make it easier to attract outside capital and rejuvenate the economy.

"What we can do in Hawaii is work on our own efficiency," Laney said. "By changing that, we change the willingness of investors to put labor and capital to work in Hawaii."