Orange County Economy Predicted to Slow

Orange County’s surging economy will slow next year as the Asian financial crisis tightens the spigot on foreign trade and the national economy weakens. But a building boom will offset some of the damage.

That was the outlook presented Thursday by Chapman University economists in their closely watched annual economic forecast.

“The sharp growth will plateau out,” said Chapman President James Doti, who is also an economist.

Orange County will suffer more than the nation as a whole from the turmoil in Asia, because more of its exports--42%--go to that region, compared to 30% nationally.

Chapman economists projected the county would lose $150 million of its approximately $1 billion in annual sales to Hong Kong, Singapore, Indonesia and the other hardest-hit areas of Southeast Asia, resulting in a loss here of 2,400 jobs.

The county’s $2.6 billion in annual exports to Japan, Korea, China and Taiwan also are at risk, Chapman said. Medical and computer-related products are among those expected to take the hardest hit.

“Our economy, not just Orange County, but the United States, depends more and more on the global economy,” said Chapman economist Esmael Adibi, coauthor of the report. While that’s generally been a positive development, he said, “there’s no question we’ve become more vulnerable” to business cycles abroad.

Adibi, director of Chapman’s Anderson Center for Economic Research, said that growing trade with other regions, including Mexico, Canada and Europe, will counter some of the damage to the county’s economy from Asia’s financial woes.

Orange County exports are expected to grow 2.7% next year, well below 1997’s 3.6% increase and the double-digit gains registered in the previous two years.

A significant slowdown in the national economy next year will also curtail the county’s growth prospects, according to the report. It predicts rather lackluster growth of 2.4% next year in real U.S. gross domestic product, which is the inflation-adjusted value of the goods and services produced by the nation. That compares with the estimated 3.7% growth in GDP this year.

With the county’s economy going full tilt and optimism riding high this year, Chapman’s is the first forecast to cast a shadow on growth because of the recent currency problems in Asia.

Despite the cautionary tone, however, Chapman forecasters remain upbeat about the Orange County economy. They said there’s enough momentum left to the expansion that another 35,000 jobs will be created next year--the same as 1997--with the resulting growth rate slipping only slightly, to 2.8% from 2.9%.