Hawaii stands to cope fairly well with national recession
People across the country are bracing for a recession that could last into next year.
While the Wall Street crisis has begun to be felt along main streets throughout the country, economists and tourism officials have good reason to expect a softer slump in Hawaii. Nobody expects significant economic growth into next year, but the islands may dodge the recession that could paralyze much of the mainland economy.
Plummeting home prices and a jarring of the financial system are causing concern about what most economists now predict will be a painful recession. However, some pockets of the U.S. economy may continue to prosper.
The adoption of ethanol from corn has created record profits for farmers, and increased incomes in China, India and elsewhere are increasing the demand for American meat. The weak dollar is benefiting exporters and retailers catering to foreign tourists.
That may be enhanced in Hawaii when South Korea is admitted to the Visa Waiver Program early next year, allowing visa-free travel to the United States, and the implementation in June of a memorandum of understanding that will allow Chinese to vacation in Hawaii. Tourism from both countries is expected to double in two years. The weak dollar also should enhance travel from Canada, Europe and Oceania, although those numbers are relatively low.
However, despite the yen's improved exchange rate next to the dollar, travel from Japan may be limited by airline capacity, rising fuel costs and an aging population, said Takashi Ichikura, executive director of Hawaii Tourism Japan. Ichikura and the Hawaii Tourism Authority will meet with Japanese travel agents in May to ask that surcharges be made part of the ticket price.
The University of Hawaii Economic Research Organization reported last week that real income growth should drop from a previously estimated 1.9 percent to 0.3 percent. The report predicts that inflation should be "relatively high," narrowing to 4.3 percent from 4.9 percent last year and slowing to 2.5 percent next year.
For a recession to occur, "You need to have negative growth in more than one sector of the economy," UHERO co-author Carl S. Bonham told the Star-Bulletin's Jennifer Sudick, "but we don't feel we are going to have that in broad sectors of the economy to forecast a recession."
Recession or not, many economists expect the downturn will last less than a year, comparing it with the most recent recession straddling eight months in 1990 and 1991. Then as now, the dollar was weak, oil prices rose and the problems began with a sharp decrease in housing prices, followed by major losses for mortgage lenders.
Some economists say this recession could last slightly longer because its underlying forces are more difficult to attack, despite the early lowering of interest rates, the upcoming tax rebates and other measures.