Washington could slip back into a recession
Washington’s chief economist says debt woes pose threat
Thursday, August 11, 2011
OLYMPIA — Economic forecasters who had projected that Washington’s economy would begin accelerating in the months to come are now growing increasingly pessimistic, warning Thursday that the risk of slipping back into recession has grown significantly.
The state’s chief economist, Arun Raha, said the economy is struggling against headwinds caused by debt battles in the United States and Europe. He had previously forecast that those issues would only cause short-term troubles, but he now expects them to continue to damage consumer confidence and suppress the state’s recovery.
“It takes a lot to turn me pessimistic, but I have turned pessimistic now,” Raha said.
The Economic and Revenue Forecast Council said state tax collections are already 1.3 percent below a forecast issued in June, and Raha expects that gap to widen in the coming months. The June forecast projected that the state would have a $163 million buffer for the two-year budget cycle, but the weak tax collections in recent weeks have already wiped out about $30 million of that.
Raha will issue a new revenue forecast in September that lawmakers will watch closely in case it forces them back to Olympia to reassess the budget. Gov. Chris Gregoire has asked state agencies to prepare for the possibility of more budget cuts, asking them to prepare plans to trim spending by 5 percent and 10 percent.
‘Roller coaster ride’
Washington had an unemployment rate of 9.2 percent in June.
Forecasters no longer have any projection of when Washington’s economic recovery will be able to regain momentum. The debt troubles in Europe appear to be spreading, and the consequences of the United States’ credit rating downgrade by Standard & Poor’s could be lasting.
Raha said the past two weeks have drastically changed the outlook of the nation’s economy.
“It’s been like a wild roller coaster ride,” he said. “Not a very fun one, I might add.”