Ongoing impacts from the Japan earthquake and protracted negotiations between Tokyo and Washington over the military build up on Guam will create uncertainty for Guam’s economy in 2012, according to an economic forecast released this week.
First Hawaiian Bank’s economic forecast for Guam and the Commonwealth of Northern Marianas says while economic signs for Guam were upbeat one year ago, optimism has since dampened in the two key sectors of tourism and the military.
In key observations:
- Tourism was down 4.8% January-October 2011, although there has been some rebound in arrivals from Japan since June. While Japan provides the vast majority of tourists to Guam, fast growing markets are China, Russia, Taiwan and Hong Kong. The merger of United and Continental Airlines will expose Guam to a more extensive air network and larger aircraft. Route expansion by Fly Guam is also seen as positive.
- The planned military buildup on Guam will likely look “much different” to earlier plans due to funding cuts in Japan and the U.S. A Master Plan originally expected in July is still to be delivered. “On the other hand, contracts continue to be awarded, suggesting that the buildup is still on track,” writes the Bank.
- There are mixed signals from the real estate market, with strong sales volume, but large median price declines
- Latest estimates for Guam’s GDP is for 2009 (released July 2011) and translates to a real annual income of US$22,293 per person (a decline from 2005 figures).
- Unemployment data (for March 2011) showed an unemployment rate of 13.3%
Commonwealth of Northern Marianas
The report states that the economy of CNMI continues to struggle. Tourism there was also hit by the Japan earthquake and tsunami. Other observations:
- Local businesses face weak demand, a 66% rise in labour costs since 2007 and increased fuel and shipping costs.
- CNMI’s Gross Island Product (GIP) declined by almost 20% in 2008-2009 (figures released July 2011.)
- CPI inflation for 2010 was 6.4%.
- Tourism has been trending down for several years, declining 30% from 2005-2009. Every month in 2011 has recorded fewer arrivals than for the corresponding month in 2010. However more frequent flights and larger planes from Asiana Airlines is expected to boost the Korea market. Direct Hong Kong-Saipan flights is already having a positive effect in that market.