Bank of Hawaii's chief economist said the state's economy is continuing to erode but that it should begin turning the corner during the first half of 2009.

Paul Brewbaker revised lower today his visitor arrival and job forecasts for 2008 as a result of the financial market volatility and the drop in U.S. consumption in the gross domestic product. He also lowered his visitor arrival and job forecasts for 2009.

Brewbaker now sees total visitor arrivals by air declining 10.6 percent in 2008 compared with his earlier forecast of minus 6.0 percent made in August. In 2009, Brewbaker is forecasting a 0.2 percent decline versus his previous forecast of a 3.8 percent increase.

For jobs growth, Brewbaker forecasts a decline of 0.4 percent in 2008 compared with the minus 0.3 percent forecast he made in August. In 2009, Brewbaker is forecasting a 0.5 percent decline in jobs growth compared with his previous forecast of a 0.6 percent increase.

“;If oil prices that have fallen to date remain at current levels through next year because of the slowdown in global economic growth, then the low airfares could continue to support the tourism economy, which now has been augmented by lower hotel room rates that weren't the case a year ago,”; Brewbaker said. “;If that happens, then the tourism recovery is a fairly secure part of the forecast moving through 2009.”;

Brewbaker said the Hawaii economy - despite the housing and tourism declines - had been just gradually slowing. But he said the economic picture changed during the last two months with the prospect of more sustained economic weakness nationally due to the volatile market and the decline in consumer consumption.

“;The magnitude how much things have changed are reflected in the significant increase in government monetary and fiscal policy intervention that has occurred since September,”; Brewbaker said. “;While we're encouraged by the scope of the vigor of policy intervention - and I think it's entirely appropriate what the government is doing now what it didn't do in the 1930s - nonetheless the need for those interventions speaks to an environment that will be much less robust in 2009 than previously expected.”;

Brewbaker said earlier this year he expected Hawaii's visitor arrivals to recover toward the end of 2008. Now he said he doesn't expect the recovery to occur until the first half of 2009.

Given that tourism is a discretionary expense, Brewbaker thinks that lower oil prices will translate into lower trans-Pacific airfares and, along with lower hotel rates due to declining occupancy levels, will entice tourists to return to Hawaii in growing numbers.

“;At the darkest moment, there's actually a glimmer of light in that Hawaii has very quickly become a comparatively much more affordable destination than it was a year or two ago,”; he said. “;A lot of people haven't picked up on that.”;