Economists expect slower growth for isles in 2007
Tourism and investment will take a hit as world trade slumps
Foreign tourism and investment in Hawaii is likely to soften in the coming year due to a considerably weaker global economic outlook, according to University of Hawaii economists.
The unwinding of global trade imbalances and end of the U.S. housing boom are creating a drag on the global economy, which will expand by about 3.3 percent in 2007, the University of Hawaii Economic Research Organization said in a report this week. The gross world product expanded by 3.8 percent this year.
That slowdown in global growth could mean increased frailty in Hawaii's economy, said Byron Gangnes, an economist with UHERO.
The hot housing market, military expansion and increased tourism helped push Hawaii's economy in 2004 and 2005. Last month, Gangnes and Carl S. Bonham, UHERO's director, forecast that an economic slowdown was on the horizon for Hawaii. Hawaii's economy will continue to slow as the state's labor, housing and tourism markets remained tepid, inflation soared and personal income growth idled, they said.
The latest global report cautions that further economic woes could be on the horizon for Hawaii. Growth in 2007 will be more measured putting Hawaii at greater risk of being able to recover from natural disasters, tragedy or downturns in the nation or world economy.
"There's a lot more uncertainty about the future course of the Hawaii's economy," Gangnes said yesterday. "We aren't predicting a recession, but we are anticipating much slower growth."
As Hawaii's growth slows, residents and businesses will feel the pinch, he said.
"We are moving into a time period where there aren't going to be dramatic growth rates for businesses to ride along," Gangnes said. "It's going to be much harder for businesses to make a profit, and we need to be aware that as a result of the slowdown in the global economy there is a much higher potential for conditions to worsen."
UHERO's latest outlook doesn't offer much hope that Japanese tourism to Hawaii will recover. Visitor arrival statistics for 2006 came in weaker than expected due to a decline in the Japan market and a recent upward data revision to tourism's 2005 statistics.
"Although the weakening of the dollar against the yen for the past several months has given Japanese travelers more buying power, we don't expect to see much improvement from this market," Gangnes said.
Asian investment in real estate could also be impacted by the decline in tourism as well as the perception that the U.S. housing market is softening, said Stephany Sofos, a Honolulu-based real estate analyst.
"Hawaii is very closely tied to the economy in Asia and the Pacific Rim, but the economic drop would have to be significant to see any major impacts," Sofos said.
Job growth in Hawaii, which had already slowed due to the state's historically tight labor market, is likely to see further deceleration as more businesses exercise caution, Gangnes said.
Last month, UHERO forecast that Hawaii's job growth could be up to a percentage point weaker in 2007 than it was this year, he said.