Georgia’s economy faces global headwinds, says GSU’s top economist
By David Pendered
The growth of Georgia’s economy will be measurably impacted by the strained economies of trade partners who last year purchased nearly $40 billion in Georgia-made goods, Georgia State University’s top economist observed Wednesday.
“Our manufacturers and exporters sent almost $40 billion of goods to the global marketplace last year, and three-quarters of the state’s 18 Fortune 500 companies operate on a global scale,” Rajeev Dhawan wrote in his “Forecast of Georgia and Atlanta,” released Wednesday.
Dhawan directs the Economic Forecasting Center at GSU’s J. Mack Robinson College of Business. He released his forecast at Wednesday’s Economic Forecasting Conference.
“Not only the Brexit decision [for the United Kingdom to leave the European Union] but also overall global economic health issues, such as China’s stalled economy and oil-driven budgetary constraints in the Middle East, are key factors in our domestic-led growth,” Dhawan wrote.
Georgia’s list of exports covers the waterfront and has generally has increased since 2012, except for a downturn in 2015. According to a report by the Census, Georgia’s exports totaled $38.5 billion in 2015; $39.4 billion in 2014; $37.6 billion in 2013; and $36 billion in 2012.
According to the Census, Georgia exports categories of goods that include civilian aircraft, engines and parts ($6.2 billion); medical needles and catheters ($450 million); carpets and flooring ($347 million); chicken and parts ($729 million); kaolin ($493 million); and automobiles ($2 billion).
Events in Europe are of particular concern to Georgia manufacturers and the business of exports.
The United Kingdom is Georgia’s fourth largest trade partner, Dhawan noted.
According to the Census, the U.K. accounted for 4.7 percent of Georgia’s exports in 2015 and has been increasing its share steadily since the 3.1 percent rate recorded in 2011.
At some point, the U.K. is to exit the European Union because of results of a referendum in June. Dhawan predicted the maximum hit to the U.S. economy will be a negative 0.3 percent impact on GDP growth.
Regardless of how the withdrawal shakes out in terms of Georgia/U.K. trade relations, Dhawan noted that the bigger issue is how the EU’s economy will respond to the withdrawal. The EU accounts for 15 percent of state exports, excluding the U.K., Dhawan observed.
“With the EU already on fragile footing, the U.K.’s eventual exit could push their economic activity lower and affect the importing capabilities of its countries. However, the drop in exports to Canada, China, Singapore, Brazil and Japan (accounting for more than 33 percent of state exports) will have greater impact,” Dhawan said in his “Forecast of Georgia and Atlanta.”
Georgia’s corporate sector has benefitted from the flight to safety of international investors, Dhawan observed. The positive cash flow prompted the creation of 16,5009 in the first half of 2015, just off the pace of last year, Dhawan observed.
Manufacturing didn’t share the gains. About 800 manufacturing jobs were created in the first half of 2015. This occurred even though Georgia didn’t suffer the setbacks notched in states that produce shale oil and gas, sectors that have collapsed amidst low energy prices.
The construction sector benefitted from a surge in permits for the first half of 2016. But Dhawan doesn’t expect the trend to continue.