Long-term isle
outlook still positive

Attacks will harm Asia,
economists say, but rebound likely

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By Rick Daysog
rdaysog@starbulletin.com

The terrorist attacks on the World Trade Center and the Pentagon will mean fewer visitor arrivals in the isles for now. But a longer outlook on Hawaii's economy remains bright, according to local analysts.

Robert Lees, secretary general of the Pacific Basin Economic Council, said he expects Tuesday's carnage to roil the financial and business markets on the mainland and spill over to the already fragile Asian economies.

The bottom line: Fewer eastbound and westbound visitors to Hawaii.

"We're already in a dizzy state and this just shell-shocked us," said Lees, whose organization is made up of more than 1,100 major corporations in 20 Asia-Pacific countries. "New York and Washington could not have happened at a worse time."

Lees said the year-long Silicon Valley downturn -- which has resulted in a glut of office space, massive job losses and weakening of consumer confidence in California -- was already a trouble spot before Tuesday's attack.

What's more, Japan's economy continues to suffer as Prime Minister Junichiro Koizumi has struggled to implement much-needed economic reforms, he said.

Carl Bonham, University of Hawaii economics professor, said that while the terrorist attacks will likely hurt the state's visitor industry, the longer term impacts are difficult to gauge since nobody knows how long the crisis will last.

But he believes that Hawaii's overall economy is much stronger than most people think.

While tourism has been flat for the year, other sectors such as the military and construction have picked up the pace, he said. Bonham noted that personal incomes in Hawaii have risen a robust 4.7 percent during the first quarter from a year earlier, while the number of jobs grew 2 percent during the first six months this year.

Both Bonham and Lees said they were encouraged by the Federal Reserve's commitment to support the financial markets, once they reopen. Bonham added that he wouldn't be surprised to see the Fed lower rates on the same day that the nation's stock markets reopened for trading.

"Things don't look good at the moment but I don't think they should be taken out of proportion," Bonham said.