Slight growth in economy seen this year • Bank of Hawaii predicts growth to reach 1-2 percent

A modest turnaround of the local economy is expected to take place this year after reaching rock bottom last year due to currency upheavals in Asia, particularly in the Commonwealth’s largest tourism market — Japan and Korea.

Economic growth will however partially depend on the number of available regular airline seats between Saipan and South Korea, according to a report prepared by the Bank of Hawaii.

The local economy is expected to grow by no more than one to two percent this year. This may be low but economists say the figure is good enough with major Asian countries still reeling from the two-year-old financial crisis.

The Bank of Hawaii report also noted that the CNMI economy is projected to pick up to 3-4 percent next year when more Japanese and Korean travelers begin taking overseas trips again.

The document pointed out that the development will have to be spurred by a turnaround in tourist traffic which would cause growth in business receipts, employment, taxes and the rest of the economy.

The Bankoh report ruled out further growth in the garment manufacturing industry explaining that the sector has reached its mandatory peak for active licenses and employment due to the cap in the number of apparel factories and nonresident workers it may employ.

Mainly because of the impending pullout of the garment sector, an economic study funded by the Office of Insular Affairs last year predicted that the CNMI’s troubled economy is heading for yet another recession which is expected to happen between now and the year 2005.

Economist Richard Conway said the further decline in the local economy may be triggered by the possible demise of the apparel industry which has now grown to become the largest private sector employer in the islands.

According to 1998 figures, the garment sector employs about 14,200 people which is almost 50 percent higher than the tally recorded three years ago at 7,700.

The study noted that about 21,600 jobs in the CNMI economy were dependent on the garment industry, which constituted nearly one-half of all employment in the Commonwealth.

When the garment sector pulls out of Saipan, CNMI may lose an average of 3,090 jobs per year, including 2,030 in the half-a-billion-dollar garment industry.

This, even as the tourism industry is expected to recover and grow at an annual rate of five percent between now and 2005, which is the average growth rate during the 1990s before the financial upheavals impacted major economies in Asia.