After more than a decade of expansion, Maui—one of the state's strongest visitor destinations—has succumbed to the faltering economy.

The island, which historically has boasted the highest demand among tourists, is now seeing a more serious economic contraction from a year ago with little or no growth anticipated in the near future, according to First Hawaiian Bank economist Leroy Laney, who presented his latest report yesterday at the bank's 34th annual Maui County Economic Outlook Forum.

“;We knew it was not going to be that great of a year, but it was made worse by a bunch of unanticipated blows,”; including the credit crunch, major business closures and the loss of another cruise ship, Laney said.

The island's economic downturn is exacerbated by the closure of Molokai Ranch and the recent layoffs of 274 workers at Maui Land & Pineapple Co. It also has been affected by flat job growth, higher unemployment and a slower housing, tourism and building market, he said. The island's jobless rate is expected to reach 4.5 percent by year's end, exceeding the state average of 3.8 percent, according to the report. Maui's economy is expected to be flat in 2009 with a possible turnaround in 2010.

Maui saw the highest decline in arrivals and was the only island to see a drop in spending last year, a trend that has worsened in 2008 following turbulence in the mainland economy and the abrupt closures of Aloha Airlines and ATA. Maui's near-term fate is primarily dependent upon the struggling West Coast economy.

The tourism slump has trickled down to Maui's major market sectors, including retail, which has seen a slowdown in overall spending.

While higher gas prices cut into household budgets, retailers also are feeling the effect of higher energy prices in operations.

In addition, residential construction remains on the decline with fewer projects approved and some proposals completely shelved or delayed by developers waiting to see which way the market turns.

Meanwhile, Maui home prices continue to plummet, while the island's sole sugar operation has had to diversify into specialty products.

Despite the gloomy forecast, cooling-off periods after years of growth are necessary to allow infrastructure to catch up and slow growth in incomes to bring back affordability, according to the Maui economic forecast.