The economic forecast for Georgia -- in a nutshell -- is it's going to be another good year, P. George Benson, dean of the University of Georgia's Terry College of Business, predicted Tuesday.
Speaking at the ninth annual Economic Outlook luncheon, Dr. Benson projected that the national and state economy's growth would slow in 1999 from its recent pace, but would remain strong -- doing better than the nation's economy.
"Our conclusion is that Georgia will continue to do well in 1999," he said. "We've come a long way very, very quickly."
Gross state product will increase 3.5 percent in 1999, after adjusting for inflation. That's down from 5.5 percent growth in 1998 and would be the smallest increase since a recession in 1991.
But Georgia should exceed the growth in U.S. gross domestic product, forecasted to be 2.4 percent in 1999.
After a mild recession in 1995 and 1996, the area's economy is in an upswing, Metro Augusta Chamber of Commerce Chairman Patrick G. Blanchard said.
He noted companies invested about $177 million in the area and created more than 800 jobs. Three new businesses that located in the area included Delta Air Lines, Knology cable company and Titan Wheel.
It is difficult to determine how long the prosperity will last, however, Mr. Blanchard said.
"We are in kind of uncharted waters today," Mr. Blanchard said.
University of Georgia forecast models indicate there is a 33 to 35 percent chance of recession nationally. The spreading global downturn and recession in Asia, or the volatile stock market and a plunge in consumer confidence, could hurt the economy. But it's not likely to happen, Dr. Benson said.
"Where are we going?" Dr. Benson asked.
There are six reasons why the state economy will continue to prosper, he said. They are:
Above-average gains in personal income that will encourage consumer spending.
Personal income in Georgia will rise 4 percent, well ahead of the projected U.S. growth rate of 3.1 percent. But state income growth will fall short of this year's expected increase of 6.1 percent.
Job growth is expected to end 1998 on the upswing after a swoon in 1997. Nonfarm employment is on pace to grow 3 percent this year, after growth of 2.6 percent last year. Job growth overall will fall to 1.8 percent, or about 67,000 new jobs statewide. The projection for national job growth is 1.5 percent. Locally, it will be about 1.4 percent.
And the state's jobless rate should rise slightly from 4.2 percent to 4.5 percent -- still lower than the national rate increase from 4.5 percent to 4.8 percent.
Most state industries -- including the service sector -- primarily produce for U.S. consumers, which will help insulate the state economy from troubles abroad.
Population growth will remain steady, with almost two-thirds of the state's new residents coming from other states. Georgia is projected to be the third fastest-growing state in the nation next year, trailing only Nevada and Arizona. The state population will exceed 7.8 million, an increase of 145,000.
Georgia is emerging as one of the nation's leading incubators for technology. It was ranked by a U.S. Bureau of Labor Statistics study as No. 1 in high-tech job growth.
Important but largely unrecognized, Georgia's fast growth this decade has created a more modern and productive industrial structure than those found in other states.
Georgia is a crossroads for regional distribution and air transportation.
But there are also some indicators that the growth rate will slow.
Barriers to national economic growth include weakened foreign economies that will cut exports, lower employment in manufacturing and a decline in commercial and new home construction, despite lower interest rates.
Nationally, consumers are expected to increase spending by a moderate 2.4 percent, but also double the savings rate to 1 percent. And the federal funds rate could be lowered further by the Federal Reserve from 4.75 percent to 4.5 percent or less, possibly as low as 3.5 percent, if consumer spending slows.
Dr. Benson, who became the business college dean in July 1998, also pointed out five forces that will cut into economic growth.
They included: competition for skilled labor, limiting Georgia's capacity to sustain high growth; lower employment in construction and manufacturing -- two of the state's basic industries; hits on rural communities that depend on exports such as agricultural products, apparel, pulp and paper; limited cash from Asian companies for new investments; and infrastructure and environmental problems that are increasingly visible in Atlanta and other areas.
Frank Witsil can be reached at (706) 823-3352.
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