Economist: Recession could hurt tourism and mining in Alaska

King does not expect shutdowns at states's five main metal mines

Posted: Sunday, November 23, 2008

ANCHORAGE - The downturn in the global economy is likely to touch Alaska in two sectors, mining and tourism, according to an Anchorage economist.

Jonathan King, senior economist at Northern Economics, said Alaska's ability to avoid layoffs or shutdowns will depend on how long a recession lasts.

King spoke Thursday to business leaders at the Resource Development Council annual meeting.

Tourism and companies seeking to explore new mining and oil prospects likely will suffer next year, King said. Some mineral exploration companies working in Alaska might even go bankrupt.

Other sectors are more positive, King said.

Alaska has one of the lowest foreclosure rates in the nation and housing prices have not declined substantially.

"We're still living off the fat," King said.

State government and big companies operating in Alaska have plenty of cash because of several years of high prices for North Slope oil and metals from Alaska mines, he said.

Elsewhere in North America, low metal prices have prompted some metal mines to shut down.

King does not expect shutdowns at Alaska's five main metal mines.

"We think that production will remain stable if this downturn isn't too terribly long-lived."

As for tourism, the typical, affluent Alaska visitor is the kind of person who is cutting expenses and worrying about the declining value of retirement savings.

"If you look at who we've tried to bring to Alaska, (they are) a little more affluent. It's the people who are close to retirement ... looking at their 401(k)s," King said.

They may fear the effects on their bank account of a drive or flight to Alaska, he said, and Alaska tour companies could have a tough year.

Visitor spending probably will fall next year even if the industry's biggest customers, cruise-ship passengers, arrive in the same numbers as they did this year. Trips will be steeply discounted and passengers will be budget-conscious, King said.

Also, the value of the dollar is strengthening in relation to foreign currency, reducing Alaska's attractiveness to international travelers, he said.

If Alaska tourism remains flat rather than declining, it will be "a major victory," King said.

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