Fewer visitors weaken economy in Hawaii

Hawaii’s economy will weaken a little more this year than previously expected given fewer visitors because of the H1N1 flu worries and a proposed furlough for state workers.

An updated forecast from the University of Hawaii Economic Research Organization (UHERO) has little in the way of good news for the state, though one of its authors believes it could mark the end of downward forecast revisions made during the past year.

“It’s not getting as bad as fast as it was,” said Carl Bonham, UHERO executive director. “I think barring a dramatic worsening in the fiscal situation that we are pretty near the bottom of our downward forecast revisions.”

UHERO issues updated economic projections for Hawaii every three months, and in the past year has had to lower its expectations each quarter. The current forecast calls attention to Gov. Linda Lingle’s proposed three-days-a-month furlough for state workers and the hits tourism is taking because Japanese travelers aren’t vacationing as much because of the swine flu outbreak.

It projects larger declines in visitor arrivals, jobs, and personal income. It also includes upward revisions to unemployment.

“I thought we were going to leave our forecast the same, but the size of the fiscal crisis and the flu virus derailed that,” Bonham said. “If it weren’t for those two events, we wouldn’t have been lowering our forecast so much.”

The revised forecast includes:

Visitor arrivals will tumble 6.8 percent this year and rise 3.1 percent in 2010. The prior forecast called for a 5.2 percent decline this year and no change the next.

The visitor number decline this year is led by a bigger drop in Japanese visitors offset by an improving picture for mainland tourists.

UHERO forecast Japanese counts will drop 13.8 percent this year, or 3.6 percentage points lower than it previously expected.

US visitors will be off by 3.2 percent, or a slight improvement from 3.3 percent in the March projections.

UHERO noted that it appears the worst of the downturn for the US and Japanese economies that feed Hawaii’s economy appears to be over.

But it noted such “green shoots” that are talked about for the bigger economies are more difficult to find here.

“We continue to expect the Hawaii economy to have stabilized by the end of the year,” UHERO’s report said. “But it remains difficult to see where a robust recovery might come from.”