Benjamin C. Ayers, Dean and Earl Davis Chair in Taxation at UGA’s Terry College of Business, foresaw a prosperous 2022 for Georgians at an Atlanta event Monday. Brian Powers/UGA
Next year will be the year Georgia recovers from its nearly two-year COVID-19 slump, according to University of Georgia economic forecasters.
“We expect that Georgia’s economy will fully recover next year — it will be 100% of normal by mid-2022, if not earlier,” said Benjamin C. Ayers, Dean and Earl Davis Chair in Taxation at UGA’s Terry College of Business.
Despite challenges from the ongoing pandemic, Georgia’s economy is poised to complete its recovery more quickly than those of other states, Ayers said Monday at the Atlanta kickoff of the university’s 39th annual Georgia Economic Outlook tour.
Economists are set to stop by cities across the state to forecast the outlook for different economic regions through Feb. 8.
“We’re doing well, we will continue to do well in 2022,” he said. “The pattern of growth that we’ve seen where we have slightly faster economic recovery in the state of Georgia than the U.S. will continue this next year.”
Included in the good news in the 2022 forecast is Georgia’s Gross Domestic Product, set to increase by an inflation-adjusted 4.3%, slightly more than the 4% expected for the U.S.
Employment also should outpace the rest of the nation, he said, rising by 3.2%, compared with 2.7% nationally, leaving Georgia with an average annual unemployment rate of 3.2%, 0.5% lower than the 3.7% rate estimated for 2021.
Ayers listed several factors behind Georgia’s fast growth, including a large number of economic development projects on the way, competitive economic development incentives, more foreign direct investment, a boom in housing and vehicle sales and strong in-migration of residents from other states.
Still, there are some potential risks for Georgia’s recovery, the largest of which would be a more dangerous variant of the virus.
“As we all know, the pandemic is not yet over,” Ayers said. “Our expectation is that each succeeding wave of cases will do less damage to the economy, and we have already seen that, but it’s possible that more deadly mutations of the virus could develop.”
A worse than expected shortage of materials could also hamper Georgia’s economic growth.
“We definitely have seen supply-side problems ranging from shortages of raw materials, intermediate goods, finished goods, as well as the shortage of workers,” Ayers said. “Those challenges have slowed growth this year, and will do so again in 2022.”
Inflation is already a headache for Americans, and it could prove to be a stumbling block for Georgia’s economy as well, Ayers said.
Mark Vitner, Managing Director and Senior Economist at Wells Fargo said he’s more pessimistic than most about inflation, which he said is higher in metro Atlanta than in any other metro area in the country.
“The reason why it is so much higher in Atlanta than it is in other parts of the country is all these Yankees moving here,” he said. “I hate to break it down that simple, but it’s really all the folks coming from the Northeast that have lots of cash because they sold their house for a very high dollar amount and they bought more expensive homes here, that’s pushed the median price of a home way up. We’ve also seen rents in Atlanta increase by about 20%.”
Vitner said supply shortages are only partly to blame for inflation growth.
“(Inflation) is going to create more long-term problems for the economy than anyone is counting on right now because the longer that inflation persists, the more that assets get mispriced and misallocated, and that’s what sets up recessions,” he said.
Despite the risks, Ayers said he’s optimistic about Georgia’s 2022.
“Although there are some downside risks to our forecasts and you hear those in the headlines, there are also many, many upside possibilities that actually could cause Georgia’s economy to grow faster than we predict,” he said.
For example, Georgians could spend more of the savings they accumulated during the pandemic, more workers who retired could decide to come back to work or more immigrants could move to Georgia.
“Overall, if you consider both the upside and downside, they’re relatively evenly balanced, and most of the downside risks are more likely to slow our economy as opposed to cause a recession,” Ayer said. “So we think the risk of recession beginning in 2020, to be quite low. If we were to ballpark it, you’d say about 20%, but that should be interpreted as being a very low number.”
Not everyone is feeling the bump
While the economists’ predictions may come as a relief for many Georgians, the recovery so far has not affected all residents equally.
According to October data from the Center on Budget and Policy Priorities, 18% of adults in Georgia living with children said kids in their household were not eating enough because of finances, compared with 12% nationwide.
And nearly a quarter –23% — of Georgia renters are behind on their rent, compared with one in six for the nation, and young people, Blacks and Latinos are suffering more than other Georgians.
And in contrast to the other optimistic projections numbers, the state’s nominal personal income will grow by only 1.9% in 2022, which is lower than the 7% gain estimated for 2021.
“This sharp slowdown in personal income reflects the winding down of federal stimulus programs that provided large transfer payments to individuals rather than slower growth of Georgia’s economy,” the economists’ report says. “In contrast, the wage and salary-based personal income will grow faster in 2022 than in 2021.”
As Georgia lawmakers return to work next month, they will decide how those struggling Georgians will fare under the next year’s budget, said Georgia Budget and Policy Institute’s Senior Policy Analyst Danny Kanso.
“Support from policies like the expanded Child Tax Credit and assistance under the American Rescue Plan have helped to give families and communities across the lifeline needed to endure the many challenges of the pandemic,” he said. “However, looking ahead to next year, now that Georgia’s fiscal position has significantly improved, the state has a responsibility to restore budget cuts to public schools, behavioral health, human services, and the other core areas that remain underfunded to ensure that our state can sustain an equitable recovery, while federal lawmakers should act quickly to extend the policies that have powered Georgia’s recovery.”
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